Do you need to track your related party transactions?

Do you need to track your related party transactions?

Charities often work with other related organisations and people to help them achieve their objectives. While these relationships are beneficial, they can lead to situations that give rise to actual, potential or perceived conflicts of interest and the charity must manage these risks appropriately.

Not-for-profit entities (NFPs), including charities, preparing general purpose financial statements, either as Tier 1 (full general purpose) or Tier 2 (Simplified Disclosures), have always been required to disclose details of transactions with related parties in their annual financial statements.

For 30 June 2023 year ends onwards, charities preparing special purpose financial statements in accordance with the ACNC Act 2012 must also disclose this information.

If an NFP that is not a charity prepares special purpose financial statements following legislation other than the ACNC Act 2012, it is not currently required to disclose related party transactions.

Who is a related party?

The definition of a ‘related party’ in IAS 24 Related Party Disclosures is complicated and working out who is a related party to your entity can be tricky. This is particularly so for NFPs trying to apply the definition to governance structures and relationships. Our article, ACNC guidance - Who is a related party? will assist you to identify related parties in a not-for-profit context.

How to track related party relationships and transactions?

In October 2023, the Australian Charities and Not-for-profits Commission (ACNC) published a free template for charities to maintain a register of their related party transactions. This template can be found on the Related Party Transactions page on the ACNC website and enables a charity to record:

  • The name of each related party
  • Nature of the related party relationship
  • Description of the transaction
  • Amount
  • Date
  • Approval details (date and process).

Recording the approval details ensures that related party transactions are identified and disclosed, and any conflicts are managed on a timely basis through a formal approval process.

Need assistance?

If you need help identifying your related party relationships, or preparing your first-time related party disclosures, please contact BDO’s IFRS & Corporate Reporting team.