Related-Party Transaction

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Related-Party Transaction

A transaction between two businesses that have a personal or other relationship. For example, a publicly-traded company may be inclined to hire a large, minority shareholder as a supplier. In small businesses, a company may hire the owner's brother-in-law to repair the driveway. Related-party transactions are legal, but create the potential for conflicts of interest. Thus, publicly-traded companies are required to report them on their 10-K forms.
References in periodicals archive ?
In evaluating the business rationale of a significant related party transaction outside the entity's normal course of business, the auditor may consider the following:
other relevant information required to comprehend the impact of the related party transaction on the financial statements.
Besides, the company has to annex an explanatory statement about related party transactions in general meeting notice.
The related parties aspect of the audit is important because: Generally accepted accounting principles require disclosure of material related party transactions and certain control relationships; in the absence of adequate disclosure, financial statements may be distorted or misleading; and the instances of fraudulent financial reporting and misappropriation of assets have been facilitated by the use of an undisclosed related party.
TEI strongly endorses the concept of a safe harbor for reporting corporations whose foreign related party transactions are insubstantial in relation to their aggregate business operations.
COUNTRY REVIEWS OF PROVISIONS AND PRACTICES COVERING RELATED PARTY TRANSACTIONS AND PROTECTION OF MINORITY SHAREHOLDE RIGHTS
THE board of the Securities and Exchange Board of India ( Sebi) has decided not to allow interested parties to vote on special resolutions on prescribed related party transactions.
The Fifth Circuit rejected this argument and said that while related party transactions should be scrutinized at a higher level than those between unrelated parties, related party status should not automatically disallow the transaction.
Also in August, in an internal memorandum to Lay a company Vice-president, Sherron Watkins, described her reservations about the lack of disclosure of the substance of the related party transactions with the SPEs run by Fastow.
On May 9, 2006, the Committee sought to exercise its members' rights as shareholders under Korean law to inspect Gravity's financial documents and requested copies of financial documents to conduct an investigation of certain related party transactions.
The IRS closely scrutinizes all related party transactions.
Of the few she has encountered, most have been related party transactions.