Related Party Transactions Analysis

This assignment examines related party transactions at Procter & Gamble, focusing on transactions with entities like J.P Morgan Chase Bank and J.M Smucker Company. It analyzes the nature of these transactions, their approval process, compliance with accounting standards (AASB 124), and potential risks involved. The document also discusses the role of the audit committee in overseeing related party transactions and ensuring they are conducted in the best interest of the company.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the University
Name of the Student
Authors Note
Course ID

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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2..................................................................................................................2
Critical evaluation of the related party transaction of J.P Morgan Chase Bank and J.M
Smucker Company:....................................................................................................................2
Answer to question 3:.................................................................................................................4
Consistency of Disclosures:.......................................................................................................4
Reference List:...........................................................................................................................5

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Answer to question 1:
Assigned Name of
the Company
Related Party
Category
Type of Related
Party Transaction
Related Party
Amount
J.P. Morgan Chase
Bank
Related Party Purchase $15,070,316
J.P. Morgan Chase
Bank
Related Party Purchase (Common
Stock)
$13,147,745
J.M Smucker
Company
Related Party Purchase (Common
Stock)
$164,211
American Century Related Party Transfer under
finance agreement
$3,386,703
Answer to question 2
Critical evaluation of the related party transaction of J.P Morgan Chase Bank and J.M
Smucker Company:
The related party transaction of Procter and Gamble represents a certain plan of the
company for investment in shares of mutual funds that is managed by the J.P Morgan Chase
Bank. It is worth mentioning that J.P Morgan Chase Bank is the trustee that is defined by the
plan and therefore, the above stated transaction qualify as the party-in-interest transactions.
Additionally, the amount of fees that is paid relating to the investment management service
were included as the reduction of the return earned on each of the fund (Roth 2016).
A related party transaction can be regarded as the transaction that can be regarded as
the transfer of resources, service or any other forms of obligations amid the reporting entity
along with its related party (Fang et al. 2016). A related person transaction will be regarded

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as approved if after the complete disclosure of the related party interest in the transaction
authorised in compliance with the standards has been set forth under section II and the
process set forth under section III.
The committee of Procter and Gamble Australian Private Limited might approve a
related party transaction presented to it given if it only presented to all the information
presented. The transaction is not inconsistent with best interest of the company as the whole
(Balsam, Gifford and Puthenpurackal 2017). The committee might in its sole direction,
impose such terms and conditions as they deem appropriate on the organization or associated
with the related parson in association with the approval of the related party transaction.
All the related party transaction of Procter and Gamble are reviewed by the external
chartered accounting firm so that it can make sure that transactions are in accordance with the
ordinary course of the business. The transactions should be based on arm’s length and must
be placed before the audit committee for the purpose of quarterly review. The related party
transactions that are entered into by the company are in best interest of the organization and
are in accordance with the provision of the AASB 124.
Investment in securities are usually exposed to numerous risk in the form of interest
risk, credit risk and overall market volatility. The related party transactions are valued at
market price for Procter and Gamble so that it can create value for its stakeholders.
Answer to question 3:
Consistency of Disclosures:
Disclosure that is made by the Procter and Gamble Australia Private Limited is in line
with the AASB 124. Investment that is made in the common stock are recorded at cost and
the related party transaction are constantly measured at cost. The plan administrator did not
identified any form of prohibited party in investments or transactions at the time reported

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during the year ended 2016. On understanding any form transaction involving a related party
transaction, the chief legal officer would gather the obligatory evidence concerning the
transaction and determine whether it is related to person transaction within the purview of the
policy (Jia, Shi and Wang 2013).
The audit committee in accordance with the AASB 124 approves the related party
transaction that is inconsistent with the best interest of the organization as the whole and it is
compliance with the relevant legislation. Interest originating from the direct and indirect
ownership by the related party transition is aggregated of lower than 10% equity shall be
deemed to be a material interest in other firms which represents a related party transaction.
The related party transactions policy has been adopted by the company to make sure
that they are in compliance with the RTP policy and the same is reviewed before the audit
committee on quarterly basis. The audit committee reviews the disclosure of any kind of
related party transactions on quarterly basis prior to the submission of the board for approval.

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Reference List:
Balsam, S., Gifford, R.H. and Puthenpurackal, J., 2017. Related Party Transactions,
Corporate Governance and CEO Compensation. Journal of Business Finance &
Accounting, 44(5-6), pp.854-894.
Fang, J., Lobo, G.J., Zhang, Y. and Zhao, Y., 2017. Auditing Related Party Transactions:
Evidence from Audit Opinions and Restatements. Auditing: A Journal of Practice and
Theory.
Jia, N., Shi, J. and Wang, Y., 2013. Coinsurance within business groups: Evidence from
related party transactions in an emerging market. Management Science, 59(10), pp.2295-
2313.
Roth, M., 2016. Related party transactions.

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