Almost every Singapore private company has related party transactions somewhere in its books, an interest-free loan from a director, rent paid to a shareholder’s property, management fees charged to or from a related company, yet many SME finance teams do not realise these arrangements carry specific disclosure obligations under the financial reporting standards, separate from the transfer pricing rules that apply for tax purposes.
This distinction matters because we are frequently asked whether preparing transfer pricing documentation is enough to satisfy a company’s related party obligations. It is not. Transfer pricing documentation addresses whether a related party transaction is priced at arm’s length for tax purposes. Financial Reporting Standard 24, Related Party Disclosures, addresses a different question entirely: whether the financial statements tell a reader that a relationship or transaction with a related party exists at all, and on what terms, regardless of whether it was priced commercially.
This guide sets out what counts as a related party under FRS 24, a standard issued by the Accounting Standards Committee, what must be disclosed, the separate IRAS reporting trigger on Form C, and practical examples SME directors will recognise from their own accounts.
Who Counts as a Related Party
FRS 24 defines a related party broadly. For a typical Singapore SME, related parties usually include:
- The parent company and any subsidiaries or fellow subsidiaries within the same group.
- Associates and joint ventures in which the company holds a significant interest.
- Key management personnel, meaning directors and other persons with authority and responsibility for planning and controlling the company’s activities.
- Close family members of key management personnel, and entities controlled or significantly influenced by them.
The definition is drawn from substance, not just legal form. A company owned 60% by one director and 40% by his spouse’s separate holding vehicle is related to that holding vehicle even though there is no direct shareholding link between the two entities.
Disclosure Is Required Even Without Payment
A point that catches many directors out is that FRS 24 disclosure applies even when no consideration is charged at all. An interest-free loan from a director, or premises made available to the company rent-free by a shareholder, is still a related party transaction requiring disclosure, precisely because the absence of an arm’s length charge is itself information a reader of the accounts needs to assess the company’s true financial position. Our guide on directors’ loans, tax and accounting treatment covers the accounting entries for this common scenario.
What the Financial Statements Must Show
| Disclosure Element | Example |
|---|---|
| Nature of the relationship | Director, controlling shareholder, fellow subsidiary, associate |
| Nature and amount of the transaction | Management fees charged, rent paid, loan advanced or received |
| Outstanding balances at year end | Amount owing to or from the related party, and terms of settlement |
| Terms and conditions | Whether secured, interest rate applied (if any), whether guarantees were given or received |
| Provisions for doubtful debts | Any impairment recognised against amounts due from related parties during the year |
Companies preparing full Singapore Financial Reporting Standards accounts must apply FRS 24 in full. Small companies using SFRS for Small Entities apply a lighter related party section, but disclosure of the relationship, transaction and outstanding balance is still required; only the volume of prescribed detail differs.
The Separate IRAS Related Party Transactions Form
Distinct from the accounting disclosure obligation, IRAS requires a company to complete the Related Party Transactions section of Form C, Item 31, if the value of related party transactions disclosed in its financial statements for the year exceeds S$15 million. This threshold captures the transactions already sitting in the FRS 24 note, so a well-prepared set of accounts makes this filing step largely a matter of totalling figures that are already disclosed rather than a fresh exercise.
Where a company’s revenue and related party transaction volumes are lower, it may still fall within scope for transfer pricing documentation separately: contemporaneous transfer pricing documentation is generally required once annual gross revenue exceeds S$10 million, though category-specific thresholds can exempt smaller transaction types even above that revenue level. Our Transfer Pricing Documentation guide sets out those thresholds and exemptions in detail; the two regimes, accounting disclosure and tax documentation, sit side by side and neither substitutes for the other.
Worked Example
A trading company pays S$180,000 a year in management fees to its Hong Kong parent and has an outstanding intercompany loan balance of S$2 million at year end, interest-free. In the financial statements, both the management fee and the loan balance must be disclosed under FRS 24, including the fact that no interest is charged. Separately, because total related party transaction value in the accounts is well below S$15 million, the company does not need to complete the RPT section of Form C, but because its revenue exceeds S$10 million, it may still need transfer pricing documentation to demonstrate the management fee and the interest-free loan terms are consistent with what unrelated parties would agree.
Why This Matters at Audit and Beyond
Auditors specifically test for completeness of related party disclosures because omitted related party transactions are a recognised fraud risk indicator under auditing standards; a director who quietly channels company funds through an undisclosed related entity is exactly the scenario FRS 24 is designed to expose. Incomplete disclosure can lead to a modified audit opinion, and in serious cases, a qualified opinion affects a company’s Section 201 true and fair view obligations under the Companies Act 1967, potentially triggering director liability questions. Our guide to Section 201 and the directors’ statement explains how this obligation is framed in law.
A related question we are frequently asked is whether a related party transaction needs to be priced at market rate to be acceptable at all. It does not have to be priced at market rate to be lawful, but it does have to be disclosed accurately if it is not. The Companies Act does not prohibit an interest-free related party loan; it simply requires the financial statements to present a true and fair view, which means the arrangement must be visible to a reader rather than presented in a way that implies it was made on commercial terms when it was not. Where the arrangement crosses into related party lending or asset transactions of a more substantial nature, separate director approval requirements under the Companies Act may also apply, and these should be checked alongside the accounting disclosure rather than treated as a purely bookkeeping matter.
If your company’s shareholding structure or intercompany arrangements have become more complex, it is worth reviewing your related party disclosures alongside your annual accounts preparation, not as a separate compliance exercise but as part of getting the numbers right the first time. Our guide on reading and understanding your company’s financial statements is a useful starting point for directors who want to follow what their accountant is disclosing and why.
A practical starting point for any SME is simply to list every related party the directors can think of, spouses, adult children, other companies a director controls, family trusts, before the year-end close begins, rather than leaving the accountant to reconstruct this list from bank statements after the fact. Directors typically know their own related party relationships far better than an external accountant reviewing the ledger for the first time, and a short list agreed at the start of the audit process saves considerable back-and-forth later.
Raffles Corporate Services can review your related party arrangements as part of your annual financial statement preparation to ensure FRS 24 disclosure and IRAS reporting obligations are both properly met.
— The Editorial Team, Raffles Corporate Services