Why Related Party Transactions Should Be Disclosed?

Related party disclosures are a critical component of a company's financial statements. They provide transparency on how its financial position and financial performance may be affected by transactions with related parties, which may or not be conducted on an arm's length basis.

Why do we need to disclose related-party transactions?

Information about transactions with related parties is useful in comparing an entity's results of operations and financial position with those of prior periods and with those of other entities. ... While not providing accounting or measurement guidance for such transactions this requires disclosure nonetheless.

What related-party transactions need to be disclosed?

Disclose all material related party transactions, including the nature of the relationship, the nature of the transactions, the dollar amounts of the transactions, the amounts due to or from related parties and the settlement terms (including tax-related balances), and the method by which any current and deferred tax ...