Who qualifies as a related party in the context of related party transactions?

In the context of related party transactions, individuals who are considered related parties include members of the immediate family of an individual who has control or significant influence over the reporting entity. This definition acknowledges that relationships can extend beyond formal business ties and includes family members who may have a financial interest or influence on the decisions made within the organization.

Recognizing family members as related parties is important because they may have the ability to influence transactions or decisions that could materially affect the financial position or results of the entity, even if they are not directly involved in the management or governance. This is in line with the principle of ensuring transparency in financial reporting.

The other options do not align with the definition of related parties. External investors generally do not qualify unless they have a controlling interest or significant influence, and individuals with no connection to the entity are clearly not related parties. Limiting this category strictly to board members fails to take into account the broader implications of familial ties as they relate to governance and control within an organization.