CA Chirag is the statutory auditor of Electric Corporation Limited, a Government Company for the year ended on 31st March 2025. The turnover of the…

As per Ind AS 24, “Related Party Disclosures”, a reporting entity is exempt from the disclosure requirements in relation to related party transactions and outstanding balances, including commitments, with (i) a government that has control or joint control of, or significant influence over, the reporting entity; and (ii) another entity that is a related party because the same government has control or joint control of, or significant influence over, both the reporting entity and the other entity. If a reporting entity applies the above exemption, it shall disclose the following about the transactions and related outstanding balances referred to: (1) the name of the government and the nature of its relationship with the reporting entity (i.e. control, joint control or significant influence); (2) the following information in sufficient detail to enable users of the entity's financial statements to understand the effect of related party transactions on its financial statements: (i) the nature and amount of each individually significant transaction; and (ii) for other transactions that are collectively, but not individually, significant, a qualitative or quantitative indication of their extent. Further, as per SA 550, “Related Parties”, in forming an opinion on the financial statements in accordance with SA 700, the auditor shall evaluate whether the identified related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the applicable financial reporting framework. In the instant case, Electric Corporation Limited, a Government Company has procured spares for transmitters for 700crore from abroad through a corporation namely PCDC India Limited which is also owned and controlled by Government of India. Even after applying the exemption of Ind AS 24, Electric Corporation Limited has to disclose the matters specified above (i.e.name of Government, nature of its relationship with reporting entity, the nature and amount of transaction etc.). Contention of Management of Corporation regarding no requirement of disclosure for transactions between State Controlled Enterprise is not tenable.