A related party transaction must be disclosed when...

In financial accounting and reporting, the disclosure of related party transactions is essential to provide transparency and ensure users of the financial statements understand the nature and potential impact of these transactions. When a transaction involves key management personnel, it necessitates disclosure due to the inherent potential for conflicts of interest and the influence that these individuals have over the entity's financial and operational decisions.

Key management personnel typically include individuals with authority and responsibility for planning, directing, and controlling the activities of the entity. Transactions with such individuals may not reflect market conditions and could influence the financial results and position of the entity. Therefore, disclosing these transactions provides users with insights into the governance and decision-making processes of the entity, which is critical in assessing its financial health and risks.

Disclosures related to these transactions can help prevent the misinterpretation of financial statements and enhance the trust of stakeholders in the integrity of the financial reporting process, making them a crucial element of corporate governance and surveillance.