Study On Financial Information Disclosure Of Related Party Transactions

The related party transaction has become a common atmosphere in the dealing of Chinese listed corporations. As is well known, "Related party transaction " means a transaction in which resource or liabilities are transferred between related parties, weather or not it is essential to the corporations. The most of the listed corporations came from the government enterprise. Some of the good assets exchanged to the listed corporations. The remaining assets became the parent corporations, the parent corporations control the listed corporations. Because the listed corporations are blinded to the parent corporations .the affiliated trades take place. By April 4,2002, about 670 listed corporations among the 1171 listed corporations had made public their annual reports of the year 2001.Among them 628 corporations involved affiliated trades, taking 93.7% percent in the annual samples.In our country's capital market, the related party transaction has become a problem which is insensitive enough to draw the attention of all walks of life. A natural related party transaction could make the business scale up, reduce the risk of the transactions, lowering the transaction cost, and realizing the strategic objectives of the whole business group. But an unusual related party transaction could make capital and profits improper transfer between related parties, and impair the interests of the company and shareholders. So it greatly affects the fairness , openness and equality of the capital market and it also places stem challenge for the supervision of the related party transaction. It is of great importance to reinforce the regulation of related party transactions in order to protect the proper interests of the investors, improve the capital market efficiency, and maintain the stability. However, these days the accounting rule is incomplete , It is lack of material regulation .such as the disclosure of transfer pricing.This article intends to analyze the policy concerning the current related party transactions , to explore the ways on how to perfect the standard system for supervising the related party transactions and how to disclosure sufficiently the related party transactions. This article mostly include: 1.The standardization about the disclosure of transfer pricing.Transfer pricing is the core problem of related party transactions. In china, It's often used by managements of listed companies to manipulate earnings, and major stockholders also use it to snatch high quality assets or income from listed companies. Transfer pricing is also used to dodge tax .The fair transfer pricing, including: full disclosure of elements of transfer pricing, the difference of normal market value, tax adjustment under "Basic arm's length standard ",and improving corporate governance. Only by this method , the information of transfer pricing can help investor make correct decision.2.Putting forward some relevant policies and suggestions.Based on empirical studies of the related party transaction by listed companies in China, the penman finds most of the financial reports disclosure insufficiently, the penman make several suggestions . first, we accountant should enhance recognization ; second, the internal control system for the related party transactions by listed companies should be established and improved ;lastly a legal system should be established to punish the misfeasance .Due to the difference in the environment, culture and economic development, different countries and regions take vary views and perspectives of related party transactions. Nevertheless, almost all of them believe that related party transactions should be strictly supervised. These countries all make some rules. All these common rules can be used for reference when we establish the related party transactions regulatory system in China.To sum up, the disclosure of the related party transactions is vital to the investors. Enhancing the quality of its disclosure is imperative under the situation.