A close member of the family

Would you believe that accountants, in an attempt to be open and honest, have had to define exactly what they consider to be a close member of the family?

All this is part of what they call a related party. Now of course this has nothing to do with a party in the sense of a birthday or a gathering of people on a night out eating and drinking. A party here is either a person or an entity. It is difficult to choose a word that describes both so they chose ‘party’. But let’s stick to the person part for the moment.

Related here has nothing to do with a family unit, but to the ‘person … that is related to the entity that is preparing its financial statements’. [1] And then they go on to inform us that this person is not alone, they come with part of their family:

“A person or a close member of that person’s family is related to a reporting entity if …” [1]

Now this is where accountants define what is a close member of the family. To keep it simple accountants believe that children and the spouse, (as they call him or her) are close members of the family, or the ‘domestic partner’. They do not go into any detail of what a domestic partner actually is. I may look into that later.

But what interests me is who accountants believe are NOT close members of a family. This is what I call bizarre. Brothers, sisters, grandfathers and grandmothers are NOT close members of a family according to accountants.

If you are an accountant, you are not close to your brother, sister or any grandparent, so keep your distance.  

[1] Paragraph 9 of International Accounting Standard 24 Related Party Disclosures, (IAS 24)

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