4. The following scenario is a summary of a legal case involving related party transactions and disclosures. The names of the parties involved, amount and any other information that could reveal the identity of the parties involved have either been replaced with fictitious information or removed. Harold and Thompson are the directors of Oregon Limited (OL), a trading company. OL has a management services agreement with LVF Limited (LVF) whereby OL provides management, consulting and admin services to LVF for a monthly fee. Both directors do not hold shares in any of the companies. LVF wanted to purchase a small company, Premium Limited (Premium) but did not have the funds to do so. OL therefore lent $4 million to LVF so as to enable LVF to purchase Premium. At the same time, OL transferred $4 million of assets (accounts receivable) to Premium. A sale and purchase agreement was prepared and signed. Upon completion of the sale and purchase of Premium, the directors of Premium withdrew the sale proceeds and resigned from the company. LVF and Premium then merged to become one single entity. Subsequently, the assets (accounts receivables) that were transferred before the acquisition turned out to be bad and had to be written off. Required (a) Applying the requirements of New Zealand International Accounting Standard (NZ IAS) 24, Related Party Disclosures, discuss whether these transactions should be disclosed in the financial statements. Your answers should not exceed 800 words. (Hint: You should first discuss the term related party before moving on to discuss related party transactions). Please note that any component of the answers beyond the maximum word limit will not be marked. (b) Assuming that you have decided that these transactions should be disclosed in the financial statements, explain the information that is required to be disclosed in the financial statements in accordance with the relevant accounting standards. 4. The following scenario is a summary of a legal case involving related party transactions and disclosures. The names of the parties involved, amount and any other information that could reveal the identity of the parties involved have either been replaced with fictitious information or removed. Harold and Thompson are the directors of Oregon Limited (OL), a trading company. OL has a management services agreement with LVF Limited (LVF) whereby OL provides management, consulting and admin services to LVF for a monthly fee. Both directors do not hold shares in any of the companies. LVF wanted to purchase a small company, Premium Limited (Premium) but did not have the funds to do so. OL therefore lent $4 million to LVF so as to enable LVF to purchase Premium. At the same time, OL transferred $4 million of assets (accounts receivable) to Premium. A sale and purchase agreement was prepared and signed. Upon completion of the sale and purchase of Premium, the directors of Premium withdrew the sale proceeds and resigned from the company. LVF and Premium then merged to become one single entity. Subsequently, the assets (accounts receivables) that were transferred before the acquisition turned out to be bad and had to be written off. Required (a) Applying the requirements of New Zealand International Accounting Standard (NZ IAS) 24, Related Party Disclosures, discuss whether these transactions should be disclosed in the financial statements. Your answers should not exceed 800 words. (Hint: You should first discuss the term related party before moving on to discuss related party transactions). Please note that any component of the answers beyond the maximum word limit will not be marked. (b) Assuming that you have decided that these transactions should be disclosed in the financial statements, explain the information that is required to be disclosed in the financial statements in accordance with the relevant accounting standards
