Advanced Accounting Assignment: Satyam Computers and MFRS 124 Issues

This report examines the application of MFRS 124, Related Party Disclosures, in the context of the Satyam Computers accounting scandal. The report begins by outlining the requirements of MFRS 124 and its alignment with IAS 24, emphasizing the importance of disclosing related party transactions to accurately reflect a company's financial performance and position. The analysis then delves into the Satyam Computers case, where fraudulent accounting practices led to the misrepresentation of the company's financial health. The failure to properly disclose transactions with related parties, particularly the non-payment of debts by subsidiaries, is highlighted as a key factor in the scandal. The report underscores the critical role of MFRS 124 in ensuring transparency and preventing such financial misstatements, emphasizing the need for companies to identify and report transactions with related parties as defined by the standard. The conclusion reinforces the importance of adhering to accounting standards to maintain the integrity of financial reporting and prevent financial scandals.

Running head: ADVANCED ACCOUNTING ASSIGNMENT PRACTICE
Advanced Accounting Assignment Practice
Name of the Student:
Name of the University:
Authors Note:

1
ADVANCED ACCOUNTING ASSIGNMENT PRACTICE
Contents
Question 2:.......................................................................................................................................2
Part (b):........................................................................................................................................2
References:......................................................................................................................................4

2
ADVANCED ACCOUNTING ASSIGNMENT PRACTICE
Question 2:
Part (b):
In order to deal with the issue of reporting transactions by an entity with related parties
MFRS 124, Related Party Disclosures, is to be followed by the entity. The standard issued by the
Malaysian Accounting Standards Board is very much on the line of the International Accounting
Standard (IAS) on the topic, i.e. IAS 24.
An entity operating in Malaysia is subjected to the guidelines provided in MFRS 124 to report
the financial transactions with related parties in the financial statements of the entity. This will
enable proper and appropriate disclosure of effects of such transactions on the financial
performance and position of an entity.
Ramalinga Raju, the former chairman of Satyam Computers accepted in 2009 that the accounts
of the company were falsified to paint a better picture of the company than the actual financial
state and performance of it. The executives of the company including the chairman collided to
suppress the huge loss that the company has suffered due to the failure of the company to
correctly report the financial transactions with related parties of the company. As a result the
financial statements of the company failed to disclose the true and fair picture of the company
(McCahery & Vermeulen, 2017).
The failure of subsidiary companies and other related parties to pay huge amount of debt and
other receivables resulted in significant loss to Satyam Computers Limited. The company should

3
ADVANCED ACCOUNTING ASSIGNMENT PRACTICE
have followed proper standard to report the transactions between the parent and the subsidiary to
correctly disclose the effects of the financial transactions between the two.
As per MFRS 124 an entity firstly needs to identify the related parties and report transactions
with those parties as per the guidelines provided in the standard. As per the standard related
parties are those on which the company or any of its executives have significant control. A
subsidiary is fully controlled by the management of the parent company thus, as per the standard
a subsidiary is a related party of the parent company and vice a versa. Accordingly, in this case
the failure of one of the subsidiaries of Satyam Computers to pay the due to the company should
have been properly disclosed in the financial statements by following the corresponding standard
of MFRS 124 and IAS 24 applicable in India ("IAS Education Resources", 2018).

4
ADVANCED ACCOUNTING ASSIGNMENT PRACTICE
References:
IAS Education Resources. (2018). IEEE Industry Applications Magazine, 24(4), 7-7. doi:
10.1109/mias.2018.2827218
McCahery, J., & Vermeulen, E. (2017). Mandatory Disclosure of Blockholders and Related
Party Transactions: Stringent Versus Flexible Rules. SSRN Electronic Journal, 4(4), 17-233.
doi: 10.2139/ssrn.1937476