FAQ – Supplementary Forms (29X)

What is section 3840 of the CICA Handbook?

Section 3840 of the Canadian Institute of Chartered Accountants' Handbook (CICA) relates to the identification and treatment of related parties for accounting purposes.

What is the definition of related parties?

Section 3840.03 (g) of the CICA Handbook provides for following definition of related parties.

Related parties exist when one party has the ability to exercise, directly or indirectly, control, joint control or significant influence over the other. Two or more parties are related when they are subject to common control, joint control or common significant influence. Related parties also include management and immediate family members (see paragraph 3840.04).

How do I identify related parties?

Section 3840.04 of the CICA Handbook provides for following information with respect to the identification of related parties.

The most commonly encountered related parties of a reporting enterprise include the following:

  • an enterprise that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the reporting enterprise;
  • an individual who directly, or indirectly through one or more intermediaries, controls the reporting enterprise;
  • the other party, when an investment is accounted for by the equity or the proportionate consolidation method and the reporting enterprise is either the investor or the investee;
  • management: any person(s) having authority and responsibility for planning, directing and controlling the activities of the reporting enterprise (In the case of a company, management would include the directors, officers and other persons fulfilling a senior management function. When an independent committee of the board of directors is established in accordance with regulatory requirements, to represent the non-controlling interests of an enterprise, the directors serving on that committee are deemed not to be related parties for the transaction under consideration.);
  • an individual having an ownership interest in the reporting enterprise that results in significant influence or joint control;
  • members of the immediate family of individuals described in paragraphs (b), (d) and (e) (Immediate family comprises an individual's spouse and those dependent on either the individual or the individual's spouse.);
  • the other party, when a management contract or other management authority exists and the reporting enterprise is either the managing or managed party;
  • any party that is subject to significant influence, whether by reason of an ownership interest, management contract or other management authority, by another party that also has significant influence over the reporting enterprise; and
  • any part that is subject to joint control by the reporting enterprise (In this instance a party subject to joint control is related to each of the venturers that share that joint control. However, the venturers themselves are not related to one another solely by virtue of sharing of joint control.).
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