Question 1 Related party relationships are a common feature of commercial life. The objective of IAS 24 Related party disclosures is to ensure that financial statements contain the necessary disclosures to make users aware of the possibility that financial statements may have been affected by the existence of related parties. Required (a) Explain why the disclosure of related party relationships and transactions may be important.

(b) Blackwood is a public listed company that owns two subsidiary company investments. It owns 100% of the equity shares of Hi-Lands and 55% of the equity shares of Sunway. During the year ended 31st December 2019 Sunway made several sales of goods to Hi-Lands. These sales totaled Rs. 415 million and had cost Sunway Rs.14 million to manufacture. Sunway made these sales on the instruction of the Board of Blackwood. It is known that one of the directors of Sunway, who is not a director of Blackwood, is unhappy with the parent companys instruction as he believes the goods could have been sold to other companies outside the group at the far higher price of Rs.20 million. All directors within the group benefit from a profit-sharing scheme.

Required Describe the financial effect that Blackwoods instruction may have on the financial statements of the companies within the group and the implications this may have for other interested parties.