Question

According to FASB ASC Topic 850, Related Party Disclosures, related parties would NOT include which of the following?

1) Trusts for employee benefit plans, such as pensions, that are managed by or under the trusteeship of management
2) Management of the entity and their immediate family members
3) Stockholders of the entity and their immediate family members
4) Investments in other entities accounted for by the equity method

Answer 1

Investments in other entities accounted for by the equity method are not identified as related parties in FASB ASC Topic 850. Instead, related parties typically include entities or individuals that can exert significant influence over the reporting entity, such as management and significant stockholders.

Step-by-step explanation:

According to the FASB ASC Topic 850, Related Party Disclosures, the entities that would not typically be included as a related party are investments in other entities accounted for by the equity method (option 4). Related parties are generally defined as parties with which the reporting entity has a relationship where one of the parties can influence the management or operating policies of the other. Examples of related parties include trusts for employee benefit plans where management has control (option 1), management and their immediate family members (option 2), and stockholders and their immediate family members who have significant ownership (option 3).