ASPE provides guidance on how to measure and disclose related-party transactions. A related-party transaction is a transaction that happens between the reporting entity and either another entity that is considered "related" or a person that has a direct or indirect relationship with the reporting entity.
There are three steps in accounting for a related-party transaction:
ASPE 3840.03 and .04 provide a definition for related-party transactions.
First we establish if there is a related-party relationship.
Under ASPE a related party relationship exists when "one party has the ability to exercise, directly or indirectly, control, joint control or significant influence over the other.” Parties are related when they are both controlled by the same entity, or there is a relationship of joint control or significant influence. Additionally, management and immediately family members are also considered related-parties.
Once we have established that the two parties are related, we then establish if there is a transaction between the two parties.
A related party transaction occurs if there is either: a transfer of economic resources, obligations or services rendered between the related-parties. Consideration (cash or other assets) does not have to be given in order to be considered a related-party transaction.