Related party relationships are a normal feature of commerce and can affect the profit or loss and financial position of an entity. Related parties may enter into transactions that unrelated parties would not. Therefore, knowledge of an entity’s transactions, outstanding balances (including commitments, and relationships with related parties) may affect assessments of its operations by users of the financial statements. It is important to emphasise that AASB 124 Related Party Disclosures (AASB 124) is not designed to detect and report fraud.

The objective of this Circular is to set requirements in order to achieve consistency in the application of AASB 124 by all NSW public sector entities preparing general purpose financial statements. It also explains the related party concept, the application of the materiality principle and provides guidance on determining whether a related party transaction (including practical considerations) should be disclosed in the financial statements.

The Department of Premier and Cabinet (DPC) and NSW Treasury will centrally compile information about Ministerial related party transactions, with the exception of non-monetary benefits provided by agencies to Ministers. This information will then be provided to relevant agencies for disclosure in their financial statements. This Circular therefore provides guidance to agencies on collecting and disclosing information on non-Ministerial related party transactions.

This Circular requires agencies to consider qualitative and quantitative aspects in determining whether a related party transaction is material for disclosure. For practical reasons this Circular has determined certain transactions are unlikely to be material. This Circular also requires agencies to decide on the process for collecting data and any related legal considerations.

This Circular is issued for financial years beginning on or after 1 July 2016 and applies to all NSW public sector entities required to prepare general purpose financial statements under the Public Finance and Audit Act 1983 (PFAA), including Statutory State Owned Corporations (SOCs). It is issued as a Direction in accordance with PFAA sections 9 and 45E and a specific reference to this Circular will be included in the Statement of Corporate Intent of SOCs.

[Refer to full TC16-12 attached]