Related Party Transactions Accounting And Information Disclosure

Arm's length transactions become more and more common in business world with the improvement process of modern enterprise system and development of capital market. Arm's length transactions come into being due to the existence of affiliated parties. Technically, there's no difference between the usual transaction and the arm's length transaction, which is a neutral economic term with two-sided characteristics. From legal aspect, the two sides of the affiliated transaction are equal. However, they are not factually. The affiliated persons usually abuse the control power out of self-interest to violate fair commercial clauses, which leads to unfair affiliated transactions came to terms. Eventually, the rights and interests of the company and other related parties are impaired.As common transactions, arm's length transactions enter into the accounting processing system, after the confirming, measuring, discoursing and reporting. And the effects of such transactions are represented in the financial statements at last. The fair affiliated transactions wouldn't distort the financial position and operation result of the business. On the contrary, the unfair affiliated transactions would have bad impact on the quality of financial data due to unreasonable prices and the interests exchanged between the affiliated parties. It would make the information users hard to judge the financial position and earning power of the business and even to make wrong investment decisions. Therefore, it becomes crucial to reflect the economic essential of the arm's length transaction from the aspect of accounting conforming and measuring, and to make the information users to make informed decisions as to the business's financial position and operation results from the aspect of disclosure.At the basis of comparative studies of affiliated parties and...