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AS 18: Related Party Disclosures

A professional application note for accounts teams: what the standard controls, where it appears in company accounting, how to apply it and what evidence reviewers expect. Animated notes with Play, Pause, Replay, English and Hindi voice options are included below.

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AS 18: Related Party Disclosures: interactive explanation

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Professional scope: This is an implementation-oriented explanation for accountants, finance managers, controllers and reviewers responsible for company accounts.

1. What this standard controls

Relationships, transactions and outstanding balances with related parties are disclosed so users can understand their potential effect on financial position and performance.

Current position: Included in the ICAI Accounting Standards framework, subject to entity applicability, notified rules and later amendments.

2. Where it appears in the real accounting world

01Promoter, director and key-management transactions
02Group-company sales, loans and guarantees
03Common-control arrangements
04Related-party master and year-end confirmations

3. Practical application workflow

  1. Identify parties through ownership, control, influence and key management.
  2. Maintain a relationship register independent of transaction data.
  3. Extract transactions and balances across systems.
  4. Assess substance, terms and outstanding commitments.
  5. Prepare complete disclosures and obtain management confirmation.

4. Real-world application example

A company sells goods to an entity controlled by a director’s close family member. Even if pricing is at market terms, the relationship and transaction may require disclosure; “arm’s length” does not remove related-party status.

5. Journal-entry and accounting record pattern

Underlying transactionRecord under the relevant standard and ledger.
Disclosure controlTag counterparty and relationship in the related-party register and disclosure schedule.

Entry wording is illustrative. Actual accounts, tax effects, dimensions and narration depend on the entity’s chart of accounts and facts.

6. Month-end and year-end control file

Controls to operate

  • Annual declarations from directors and key management.
  • Entity and counterparty master screening.
  • Related-party transaction approval workflow.
  • Intercompany confirmation and reconciliation.
  • Disclosure tie-out to ledgers and minutes.

Common errors and red flags

  • Relying only on company names containing the group brand.
  • Assuming arm’s-length transactions need no disclosure.
  • Omitting commitments, guarantees or nil-balance relationships.
  • Incomplete close-family identification.
  • Mismatch between statutory registers and financial statements.

7. Reviewer questions

  1. What relationship creates related-party status?
  2. Are all transaction systems covered?
  3. What balances, commitments or guarantees remain?
  4. Are terms and nature clearly disclosed?
  5. Has management confirmed completeness?

Related standards: AS 17, AS 21, AS 23, AS 27

Authoritative reference:

Before approving a material conclusion, check the latest ICAI compendium, notified Companies (Accounting Standards) Rules, entity applicability and subsequent amendments.

ICAI Accounting Standards Compendium →
Companies (Accounting Standards) Rules and amendments →

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Professional note: This educational resource does not replace entity-specific analysis, the latest notified standard, law, regulation, audit judgment or professional advice.