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The disclosure provisions of ASC 850 are intended to enable users of financial statements to evaluate the nature and financial effects of related party relationships and transactions. In general, the disclosures outlined below are required when the financial statements include material related party transactions. However, related party transactions are subject to these disclosure requirements even if they are not given accounting recognition in the financial statements.
Related party transactions that occur in the ordinary course of business may not require the same extent of disclosure. In some situations, the relationship's effect on the financial statements may be pervasive enough that disclosing the relationship alone is sufficient. Regardless, SEC registrants need to include sufficient disclosure to address SEC requirements, including S-X 4-08(k).
It may be appropriate to aggregate similar transactions by type of related party. Before aggregating, the reporting entity should consider whether disclosure of the name of a related party is necessary for a user to understand the relationship.
Related party transactions eliminated in the preparation of consolidated or combined financial statements are not required to be disclosed in those statements.
ASC 850 provides guidance on related party disclosures.

Excerpt from ASC 850-10-50-1

The disclosures shall include:
  1. The nature of the relationship(s) involved
  2. A description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements
  3. The dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period
  4. Amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement
  5. The information required by paragraph 740-10-50-17

ASC 740-10-50-17

An entity that is a member of a group that files a consolidated tax return shall disclose in its separately issued financial statements:
  1. The aggregate amount of current and deferred tax expense for each statement of earnings presented and the amount of any tax-related balances due to or from affiliates as of the date of each statement of financial position presented
  2. The principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to members of the group and the nature and effect of any changes in that method (and in determining related balances to or from affiliates) during the years for which the above disclosures are presented

The above disclosures are incremental to the identification of related party transactions on the face of the financial statements.

26.4.1 Disclosures about common control relationships

A reporting entity may also need to consider whether to disclose common control ownership or common management with other entities, even if there have not been any transactions with those entities.

ASC 850-10-50-6

If the reporting entity and one or more other entities are under common ownership or management control and the existence of that control could result in operating results or financial position of the reporting entity significantly different from those that would have been obtained if the entities were autonomous, the nature of the control relationship shall be disclosed even though there are no transactions between the entities.

26.4.2 Disclosures about arm’s-length basis of transactions

Transactions involving related parties cannot be presumed to be at arm’s length. As discussed in ASC 850-10-50-5, a reporting entity should only disclose that a transaction was at arm’s length when it can substantiate such a representation.
For example, a reporting entity may want to disclose that a loan arrangement between the reporting entity and a related party is at arm’s length. Such disclosure would only be appropriate if the reporting entity is able to substantiate that the terms of the loan are equivalent to terms it would have obtained with an unrelated lender. Similarly, a reporting entity may sell services to third parties and related parties at the same rate. In this situation, the reporting entity may be able to substantiate that the transactions occur at arm’s length.
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