How to Ace IAS 24 Questions in Your DipIFR Exam
How to Ace IAS 24 Questions in Your DipIFR Exam: The Complete Student Guide 🎯
Struggling with IAS 24 Related Party Disclosures? You're not alone. This comprehensive guide reveals exactly how to tackle IAS 24 questions in your DipIFR exam, based on real exam questions and examiner feedback.
Why Students Struggle with IAS 24 (And How You Can Avoid This) 😰
The brutal truth: Most DipIFR candidates lose easy marks on IAS 24 questions - not because the standard is difficult, but because they make completely avoidable mistakes.
After analyzing hundreds of exam scripts and examiner reports, I've identified the exact patterns that separate high-scoring students from those who struggle. Here's everything you need to know.
The Two Question Types That Always Appear 📋
Type 1: The "Size Obsessed Managing Director" Question
What it looks like (3 common variations):
Variation A - Direct Ownership:
"The managing director owns 100% of Entity X, which made small sales to our company. He argues disclosure isn't necessary because transactions represent less than 1% of revenue."
Variation B - Spouse's Business:
"My son owns a business that supplies us with a very small proportion of components. This business is one of many suppliers and the quantity is totally insignificant. I was surprised to see these transactions disclosed when far more significant suppliers are not disclosed at all."
Variation C - Family Company:
"The CEO's daughter owns 60% of a software company that provides IT services. The annual fee is tiny compared to our revenue. The CEO thinks disclosure is unnecessary since they pay market rates."
What examiners are testing:
- Can you identify ALL types of family relationships (direct, spouse, children)?
- Do you understand that size doesn't matter for related parties?
- Will you fall for the "insignificant amount" or "market rates" trap?
Type 2: The "Group Context Comparison" Question
What it looks like:
"We disclose small transactions with director's spouse's company but not large transactions with major supplier. The MD thinks this should be reversed."
What examiners are testing:
- Can you handle indirect relationships (director → spouse → company)?
- Do you understand related vs non-related party disclosure rules?
- Will you answer the specific question or just list IAS 24 requirements?
The ONE Concept That Separates Top Students from Everyone Else 🏆
Here's what examiners revealed:
"Almost all candidates identified this as a related party issue, with the consequential need to disclose details of transactions. One factor that did discriminate between candidates was the extent of comment on the fact that related party transactions are material by their nature, rather than by their size."
Translation: Nearly everyone gets the basic identification right. The high marks go to students who properly explain the "material by nature" concept.
What Average Students Write:
❌ "The son's business is a related party so it must be disclosed."
❌ "IAS 24 requires disclosure of related party transactions."
❌ "All related party transactions need to be shown."
What Top Students Write:
✅ "IAS 24 requires disclosure of all transactions with related parties
irrespective of their size. Transactions with related parties are
material by their nature, not by their amount. The fact that other
suppliers have larger transactions is irrelevant - they are not
related parties so no disclosure is required regardless of size."
The difference? Top students explicitly contrast material by nature vs material by size.
The "FOCUS" Method: How to Answer Any IAS 24 Question 🎯
F - Find the Real Issue
Don't just think "this is an IAS 24 question" - identify what the director is actually confused about:
- Why disclose small transactions?
- Why not disclose large transactions?
- Why this relationship but not that one?
O - Outline the Related Party Chain
Draw the relationship:
- Type 1: MD → Controls → Entity X
- Type 2: Director → Spouse → Controls → Gower Company
C - Compare Related vs Non-Related
Explain why one needs disclosure and the other doesn't:
- "Entity X needs disclosure because it's related..."
- "Major supplier doesn't need disclosure because it's not related..."
U - Understand the Real IAS 24 Rule
Apply only the relevant rules:
- Key management personnel = related parties
- Close family members = related parties
- Material by nature, not size
S - Satisfy the Director's Concern
Address their specific confusion directly:
- "Size doesn't determine disclosure for related parties..."
- "Related party status determines disclosure, not transaction amount..."
How to Spot Related Parties Like a Pro 🔍
The DipIFR Family Relationship Progression
Level 1: Direct Control (Easiest)
- Key management owns/controls another company directly
- Example: CEO owns 100% of supplier company
Level 2: Spouse Control (Common)
- Key management's spouse owns/controls another company
- Example: CFO's wife owns 80% of service provider
Level 3: Children Control (Frequent)
- Key management's children own/controls another company
- Example: Managing director's son owns component supplier
Level 4: Extended Family (Advanced)
- Other close family members who live with or depend on key management
- Example: CFO's dependent parent owns consulting firm
The "Close Family" Test for DipIFR
Always included:
- Spouse/domestic partner ✅
- Children (any age) ✅
- Dependents living with key management ✅
Sometimes included:
- Parents living with key management ✅
- Siblings living with key management ✅
Never included:
- Independent adult siblings ❌
- Distant cousins ❌
- Business partners with no family connection ❌
The DipIFR Question Pattern:
- Identify the key management person (CEO, CFO, Director, MD)
- Trace the family relationship (spouse, son, daughter, etc.)
- Confirm control (owns majority, controls decisions)
- Apply materiality rule (nature, not size)
Decoding the Question: What Examiners Really Want 🔓
When You See "Why Disclose Small Transactions?"
They're testing: Materiality concept for related parties Answer focus: "Material by nature, not size" Don't waste time on: Listing all types of related parties
When You See "Why Not Disclose Large Transactions?"
They're testing: Difference between related and non-related parties Answer focus: "Related party status determines disclosure" Don't waste time on: Explaining consolidation rules
When You See "What Details Should Be Disclosed?"
They're testing: Specific disclosure requirements Answer focus: Nature, amounts, balances, terms Don't waste time on: How to identify related parties
The Secret Marking Scheme Pattern 📊
Every IAS 24 question follows this mark allocation:
Identification Marks (1-2 marks):
- ✅ "Son's business is a related party to Omega" (1 mark)
- ✅ "Entity X is a related party because..." (1 mark)
- ✅ "Gower is a related party of Omega..." (1 mark)
Relationship Explanation Marks (1-2 marks):
- ✅ "Son is a close family member of key management" (1 mark)
- ✅ "The MD is key management personnel..." (1 mark)
- ✅ "Business controlled by close family = related party" (1 mark)
Disclosure Requirement Marks (1-2 marks):
- ✅ "IAS 24 requires disclosure of ALL transactions with related parties" (1 mark)
- ✅ "Must disclose irrespective of their size" (1 mark)
Materiality Concept Marks (1-2 marks):
- ✅ "Transactions with related parties are material by their nature" (1-2 marks)
- ✅ "Material by nature, not size" (1 mark)
The High-Scoring Secret: The "material by nature" explanation consistently earns the highest marks because it directly addresses the director's confusion about size.
Exam Day Strategy: Time Management That Works ⏰
Timing Breakdown for 7-Mark Question:
- 2 minutes: Read and understand what director is confused about
- 1 minute: Identify the related party relationships
- 6 minutes: Write focused answer addressing the confusion
- 3 minutes: Review for completeness and accuracy
Red Flags That You're Going Wrong:
- ⚠️ Writing more than 2 lines about what IAS 24 is
- ⚠️ Listing categories of related parties not mentioned in question
- ⚠️ Explaining consolidation when question asks about disclosure
- ⚠️ Not mentioning the specific entities named in the question
Practice Questions That Mirror Real Exams 📝
The "Family Business" Question Series
Practice Question 1: Son's Supply Business (Actual DipIFR Question) As you know, my son owns a business that supplies us with a very small proportion of the components that we use in our production process. This business is one of a number that supply us with these components and the overall quantity is totally insignificant to us. I was very surprised to see that details of these transactions with my son's business have been disclosed in the notes to the draft financial statements. This seems ridiculous when transactions with far more significant suppliers are not disclosed at all. Please explain the rationale of this disclosure to me.
Try answering this using the FOCUS method before checking the solution below.
Solution using FOCUS:
- Find: MD thinks bigger suppliers should be disclosed instead of son's small business
- Outline: MD (key management) → Son (close family) → Controls business
- Compare: Son's business is related party, other suppliers are not
- Understand: Material by nature, not size + related party status determines disclosure
- Satisfy: Size comparison with other suppliers is irrelevant for related parties
Practice Question 2: Daughter's IT Company GlobalTech's CFO's daughter owns 60% of DataSoft, which provides IT services costing £120k annually (0.5% of GlobalTech's costs). The CFO argues disclosure is unnecessary because "it's immaterial and we pay market rates."
Practice Question 3: Spouse's Property Company RetailCorp rents its head office from PropertyCorp, which is controlled by the CEO's spouse. Annual rent is £180k. The CEO states this shouldn't be disclosed because "we pay market rent and it's a standard commercial lease."
Key Pattern Recognition: All three questions test the same concept: related party status determines disclosure, not transaction size or commercial terms.
Advanced Tips for High Achievers 🏆
How to Score 7/7 Every Time:
1. Use Precise Language
- Say "key management personnel" not "senior staff"
- Say "close family member" not "relative"
- Say "material by nature" not "important"
2. Reference IAS 24 Correctly
- Start with "under IAS 24 Related Party Disclosures..."
- Don't just say "the standard requires..."
3. Address Both Sides
- Explain why one party IS related
- Explain why the other party is NOT related
4. Show the Logic Chain
Director → Close family member → Controls company → Related party → Must disclose
vs
Major supplier → No special relationship → Not related party → No disclosure required
Last-Minute Revision Checklist ✅
The Night Before Your Exam:
- □ Memorized the relationship types: Key management, close family, controlled entities
- □ Understand the golden rule: Material by nature, not size
- □ Can distinguish: Related party disclosure vs consolidation
- □ Know the key phrase: "Material by their nature, not their size"
- □ Practiced: Answering the specific question, not listing all IAS 24 rules
- □ Remember: Size of transaction NEVER matters for related parties
Common Exam Disasters (And How to Avoid Them) 💥
Disaster 1: The Consolidation Confusion
What students write: "Entity X should be consolidated because the MD owns 100%" Why it's wrong: Personal ownership ≠ company ownership Correct approach: Focus on related party disclosure, not consolidation
Disaster 2: The Generic Standard Dump
What students write: "IAS 24 applies to the following categories... [lists everything]" Why it fails: Doesn't answer the specific question asked Correct approach: Address the director's exact confusion
Disaster 3: The Size Trap
What students write: "The transaction is material because it's significant to the subsidiary" Why it's wrong: Misses the "nature not size" rule Correct approach: "Related party transactions are material by nature"
Real Examiner Quotes That Reveal Everything 🗣️
"Candidates should make sure they answer the exact questions the director is asking... A significant minority of candidates set out the IAS 24 requirements without any attempt to relate them to the specific context."
Translation: Stop regurgitating the standard and start solving the problem.
"Only a few fully explained exactly why this was so, and that related party transactions are material by their nature rather than on the basis of their size."
Translation: Saying "it's a related party" isn't enough - explain WHY and emphasize nature over size.
Your Action Plan for IAS 24 Success 🚀
This Week:
- Master the FOCUS method with practice questions
- Memorize the key phrases that score marks
- Practice timing - 7 marks in 12 minutes maximum
Day Before Exam:
- Review common relationship types (management, family, controlled entities)
- Practice identifying director's confusion in sample questions
- Rehearse opening sentences that directly address the issue
In the Exam:
- Read the director's quote carefully - what exactly are they confused about?
- Use the FOCUS method to structure your answer
- Check you've addressed their specific concern, not just listed IAS 24 rules
Final Words: You've Got This! 💪
IAS 24 questions in DipIFR are actually gift marks - if you know what you're doing. The standard isn't complex, the relationships are usually straightforward, and the rules are clear.
The only reason students lose marks is because they:
- Fall for the size trap
- Confuse consolidation with disclosure
- Answer generic questions instead of specific ones
Now you know better. You have the FOCUS method, you understand the examiner's expectations, and you know exactly what scores marks.
Most importantly: You now think like a top student, not like someone who just memorizes standards.
Go show that exam who's boss! 🎯
