Related-Party Accounting Training for Staff Accountants: Identify, Document, Reconcile, and Disclose Related Transactions

By Vincent Howard, CPA | Managing Partner, Howard, Howard and Hodges | SkillAbility for Accounting Firms

Last updated: September 3, 2026  |  34-minute read

What Is Related-Party Accounting Training for Staff Accountants?

Related-party accounting training develops a staff accountant’s ability to identify relationships that can influence transaction terms, connect those relationships to the accounting records, apply the correct underlying GAAP, reconcile related balances, and prepare transparent ASC 850 disclosures.

ASC 850 is titled Related Party Disclosures for a reason.

It primarily tells financial statement preparers what users need to know about material related-party relationships and transactions. It does not create one universal measurement basis for every related-party transaction.

Examples:

• A lease with a related party is accounted for under ASC 842 and disclosed under ASC 850.
• A guarantee can require ASC 460 accounting plus ASC 850 disclosure.
• A common-control business transfer can require ASC 805-50 historical-carrying-amount accounting plus related-party disclosure.
• A loan to a related party may require financial-instrument and credit-loss guidance plus ASC 850 disclosure.
• A tax-sharing arrangement can involve ASC 740 plus ASC 850.

This guide connects directly to Intercompany Accounting Training for Staff Accountants, Consolidation Accounting Training for Staff Accountants, Lease Accounting Training for Staff Accountants, Business Combination Accounting Training for Staff Accountants, and Workpaper Review Checklist.

Why Related-Party Accounting Is a Judgment-Development Topic

I have practiced public accounting since 1990, founded my accounting firm in 1993, and helped grow Howard, Howard and Hodges from three people to approximately 50 staff. Since 2020, I have built SkillAbility around a recurring development problem: staff often receive a list of “known related parties” from last year’s file and treat completeness as somebody else’s responsibility.

That is risky because related-party identification can change when:

• ownership changes,
• a manager starts a side business,
• a family member becomes a vendor,
• a new affiliate is formed,
• a company invests in an entity subject to equity-method accounting,
• an owner guarantees debt,
• common-control entities begin sharing employees or facilities,
• a tax-sharing arrangement changes,
• an internal reorganization moves a business between controlled entities.

The highest-value staff behavior is not “update the footnote.”

It is:

What Is Current in Related-Party Accounting in 2026?

ASC 850’s core identification and disclosure requirements remain stable in 2026.

Current practice still shows why the topic matters.

Chart: Where Related-Party Judgment Concentrates

SkillAbility training heat map—not a FASB ranking. Actual risk depends on ownership complexity, governance, common control, financing, leases, management companies, family businesses, equity-method investments, carve-outs, and the quality of vendor/customer master data.

The RELATED READY Framework

R — Who Counts as a Related Party Under ASC 850?

ASC 850’s related-party definition is broader than “the owner and companies the owner owns.”

Related parties include:

• Affiliates of the entity.
• Equity-method investees—including entities that would be accounted for under the equity method absent an election of the fair value option in the applicable circumstances.
• Employee-benefit trusts, such as pension and profit-sharing trusts managed by or under the trusteeship of management.
• Principal owners and members of their immediate families.
• Management and members of their immediate families.
• Other parties when one controls or can significantly influence the other’s management or operating policies to the point one party may be prevented from fully pursuing its separate interests.
• Other parties with influence over both transacting parties or an influential ownership interest that may prevent one or more parties from fully pursuing separate interests.

Immediate family matters because influence can travel through people

Staff should not stop at legal entity ownership.

Example:

The CFO’s spouse owns a real-estate LLC that leases an office to the reporting entity.

The LLC may never appear on the reporting entity’s ownership chart.

But the relationship can still make the lease a related-party transaction.

Common ownership is not automatically common control

Two companies can have identical shareholders without one shareholder or a controlling group actually controlling both entities.

That distinction can matter significantly when staff decide whether:

• the relationship is a related-party relationship,
• ASC 805-50 common-control accounting applies,
• ASC 842 common-control lease guidance applies,
• ASC 810 consolidation analysis changes.

E — Build a Complete Related-Party Population

The most dangerous related-party transaction is often not the one accounting knows about.

It is the one no one connected to the relationship master list.

Start with ownership and governance

Useful sources include:

• shareholder / member registers,
• organizational charts,
• board and committee rosters,
• management lists,
• conflict-of-interest questionnaires,
• subsidiary and affiliate lists,
• investment schedules,
• equity-method investee schedules,
• trust and benefit-plan information,
• tax-return ownership schedules,
• legal entity management systems.

Then search the transaction systems

Compare the related-party register against:

• vendor master,
• customer master,
• employee / payroll master,
• loan schedules,
• lease administration system,
• fixed-asset vendors and counterparties,
• expense reimbursements,
• bank accounts and guarantees,
• general-ledger names and descriptions,
• intercompany account codes.

Look for indirect indicators

Staff should recognize patterns such as:

• vendor address matches an executive’s home address,
• vendor bank information overlaps another affiliate,
• customer is newly formed and controlled by a principal owner,
• company pays expenses for an entity not in the consolidation group,
• owner personally guarantees company financing,
• affiliate provides employees without invoicing,
• one entity pays property taxes or insurance for another.

Use certifications as a control, not the only control

Management and governance certifications are useful.

But a year-end questionnaire alone is weaker than:

PCAOB AS 2410 similarly points auditors toward sources such as conflict-of-interest statements, shareholder registers, contracts with management, tax filings, legal responses, organizational charts, and significant unusual contracts when assessing undisclosed related parties.

L — Map Related Parties to Transactions and Balances

Once the party population is complete, staff need a transaction population.

Common ASC 850 transaction categories

• Sales and purchases
• Transfers of real or personal property
• Accounting, management, engineering, legal, or other services
• Leases or other use of property and equipment
• Borrowings and lendings
• Guarantees
• Compensating bank balances maintained for another related party
• Allocations of common costs
• Consolidated tax-return / tax-sharing arrangements

Transactions can exist even with no invoice

ASC 850 explicitly recognizes that a related-party transaction can exist even if no accounting amount—or only a nominal amount—is recorded.

For example:

• Owner’s management company provides staff for free.
• Parent company provides accounting services without charge.
• Affiliate occupies warehouse space at no rent.
• Owner provides a guarantee without a fee.

The absence of a journal entry does not erase the relationship or transaction from the disclosure analysis.

Create a related-party transaction crosswalk

A — ASC 850 Does Not Supply One Universal Measurement Rule

A common staff mistake is to see “related party” and assume the transaction should automatically be:

• recorded at fair value,
• recorded at the invoice amount,
• recorded at historical cost,
• or eliminated.

None of those answers is universally correct.

ASC 850 itself does not provide the single measurement rule.

Examples of underlying guidance

The SEC staff has similarly noted that ASC 850 does not itself prescribe measurement for related-party transactions, which are often recorded according to their stated terms unless other accounting guidance requires different treatment.

E — Consolidated vs. Separate Financial Statements

Staff need to know which reporting entity they are preparing.

Consolidated financial statements

Transactions and balances between entities included in the same consolidated group are generally eliminated in consolidation.

ASC 850 does not require disclosure in the consolidated or combined financial statements of related-party transactions that are eliminated in preparing those statements.

Separate financial statements

The same transactions can remain visible in a subsidiary’s separate financial statements.

Therefore, a management fee from Parent to Subsidiary may:

• eliminate in Parent’s consolidated financial statements,
• remain an expense and payable in Subsidiary’s separate financial statements,
• require ASC 850 disclosure in Subsidiary’s separate statements.

Carve-out financial statements

Carve-out reporting can make this more complex.

Transactions historically eliminated inside the former consolidated parent can become visible related-party transactions when the carve-out entity is presented separately.

That means a staff accountant cannot simply reuse the consolidated elimination file as the carve-out disclosure file.

For related training, see Consolidation Accounting Training for Staff Accountants and Intercompany Accounting Training for Staff Accountants.

R + E — Reconcile Related-Party Transactions and Due-To / Due-From Balances

Disclosure quality depends on reconciliation quality.

Reconcile activity, not only ending balances

For each material counterparty, reconcile:

• Beginning balance
• Sales / purchases
• Services / management fees
• Rent / lease activity
• Cash advances
• Loan borrowings / repayments
• Interest
• Cost allocations
• Property transfers
• Settlements
• Ending balance

Why two-sided reconciliation matters

Company A may record:

$1,200,000 due from Company B.

Company B may record:

$1,050,000 due to Company A.

The $150,000 difference can be:

• cash in transit,
• unrecorded management fee,
• FX difference,
• misclassified capital contribution/distribution,
• invoice timing,
• error.

The disclosure cannot be finalized until the accounting understands the difference.

Do not automatically net due-to and due-from

Separate legal obligations may not meet the applicable offsetting criteria.

The fact that the counterparties are related does not automatically create a right of setoff.

Document settlement terms

ASC 850 disclosures include amounts due from or to related parties and, when not otherwise apparent, terms and manner of settlement.

Staff should therefore know:

• interest rate,
• maturity,
• whether callable on demand,
• scheduled payments,
• collateral,
• whether balances are routinely rolled,
• whether settlement occurs through cash, dividends, capital contributions, or intercompany clearing.

D — Common-Control Transfers: Related Does Not Mean Acquisition-Method Fair Value

A transfer between entities under common control can look like a business acquisition in legal documents while following very different accounting.

A true common-control transaction generally does not represent a change in control over the transferred net assets from the ultimate parent’s perspective.

Accordingly, ASC 805-50—not the acquisition method in ASC 805-10/20/30—governs the transfer.

Core measurement concept

The receiving entity generally recognizes transferred assets and liabilities at historical carrying amounts reflected in the ultimate parent’s financial statements.

If consideration differs from those carrying amounts, the difference generally goes to equity in the separate financial statements rather than creating acquisition goodwill or a bargain-purchase gain.

Example

Parent owns 100% of Operating Co. and 100% of Real Estate Co.

Parent transfers a business with net assets whose historical carrying amount in Parent’s consolidated financial statements is $4.2M from Operating Co. to Real Estate Co. for $6.0M.

If the transaction qualifies as common control:

• Real Estate Co. generally records the transferred net assets at the relevant historical carrying amount—not $6.0M fair value.
• The difference between consideration and historical carrying amounts is generally an equity transaction in the separate statements.
• The transfer has no gain/loss effect in Parent’s consolidated financial statements.

Common ownership is not enough

If four investors own two businesses in identical percentages but no investor or controlling group controls both, the transaction may involve common ownership without common control.

Staff should escalate the control analysis before applying ASC 805-50.

For the acquisition-method contrast, see Business Combination Accounting Training for Staff Accountants.

D — Related-Party Leases and the 2026 Common-Control Lease Context

Related-party leases are one of the best examples of why staff must apply both the underlying Topic and ASC 850.

Deloitte’s current lease roadmap is dated August 2026.

General related-party lease rule

Except for qualifying common-control arrangements using the ASU 2023-01 practical expedient, related-party leases generally follow the same ASC 842 classification and accounting requirements as unrelated-party leases based on legally enforceable terms and conditions.

ASU 2023-01 practical expedient

Private companies and NFPs that are not conduit bond obligors can elect an accounting policy practical expedient for arrangements between entities under common control.

The expedient allows use of the written terms and conditions of the arrangement to determine:

• whether a lease exists,
• lease classification,
• subsequent lease accounting.

The practical expedient can be applied on an arrangement-by-arrangement basis.

Common-control leasehold improvements

ASU 2023-01 also changed the accounting for leasehold improvements in common-control arrangements for all entities.

When the lessee continues to control the use of the underlying asset through the lease, qualifying leasehold improvements are generally amortized over their useful life to the common-control group rather than automatically over the shorter related-party lease term.

ASC 850 disclosure still applies

Even when the lease measurement follows ASC 842, the entity still considers ASC 850 disclosure of:

• relationship,
• transaction nature,
• lease amounts,
• balances due to/from,
• terms affected by the relationship.

For the underlying lease model, see Lease Accounting Training for Staff Accountants.

A — Do Not Call a Related-Party Transaction “Arm’s Length” Without Evidence

ASC 850 explicitly warns that related-party transactions cannot be presumed to occur on an arm’s-length basis.

The competitive conditions that normally support market pricing may not exist.

Weak disclosure

“All transactions with affiliates were conducted on terms equivalent to those available from unrelated parties.”

Why that can be a problem

What supports the claim?

• Competitive bids?
• Third-party comparable leases?
• Independent appraisal?
• Transfer-pricing study?
• Market-rate loan quotes?
• Independent board approval?

If there is no support, the disclosure should describe the actual method used to establish terms rather than implying market equivalence.

Better neutral wording

Examples of factual descriptions:

• “Management fees are based on allocated payroll and occupancy costs plus a fixed administrative charge.”
• “The note bears interest at 6% and is payable on demand.”
• “Rent is based on the written lease agreement between entities under common control.”

D — What Does ASC 850 Require You to Disclose?

ASC 850 requires disclosure of material related-party transactions, subject to specified exceptions such as ordinary-course compensation arrangements, expense allowances, and similar items.

Core disclosure components

1. Nature of the relationship.
2. Description of the transactions for each income-statement period presented, including transactions assigned no amount or only nominal amounts, plus other information needed to understand their financial-statement effect.
3. Dollar amounts of the transactions for each period presented and the effect of any change in how transaction terms were established compared with the preceding period.
4. Amounts due from or due to related parties at each balance-sheet date presented and, when not otherwise apparent, the terms and manner of settlement.
5. Applicable tax-sharing disclosure information required by the referenced ASC 740 guidance.

Build disclosure from the reconciliation—not from last year’s note

Materiality is not only the dollar amount

A smaller related-party transaction can matter because it:

• changes control or governance,
• creates a guarantee,
• moves assets below market or at unusual terms,
• affects management compensation or incentives,
• reveals dependency on an owner or affiliate,
• creates liquidity support.

Common-Control Relationships Can Require Disclosure Even With No Transactions

ASC 850 includes a separate control-relationship disclosure requirement.

If the reporting entity and one or more other entities are under common ownership or management control, and the existence of that control could cause the reporting entity’s operating results or financial position to be significantly different from what they would have been if the entities were autonomous, the nature of the control relationship should be disclosed even if there were no transactions.

Example

Owner controls Company A and Company B.

Company A obtains key employees, financing access, and purchasing leverage because of the shared owner, but no intercompany invoices occur during the year.

The absence of transaction volume does not automatically eliminate the disclosure question if the common-control relationship itself could materially affect Company A’s financial position or operating results.

No-Charge and Nominal-Amount Transactions Still Belong in the Population

ASC 850 specifically contemplates transactions for which no amount or only a nominal amount is recorded.

Example: free management services

Parent’s CFO and accounting team spend significant time supporting Subsidiary, but Parent does not charge Subsidiary.

Even when the receiving entity does not recognize an amount under the applicable accounting model, ASC 850 can still require disclosure of the transaction.

Example: owner guarantee

The owner personally guarantees a bank loan and charges no guarantee fee.

That support can be important to financial statement users because it affects liquidity and financing access.

Example: free warehouse use

An affiliate lets the company occupy space with no written rent.

Staff should evaluate:

• ASC 842 lease implications,
• common-control practical expedient if eligible,
• ASC 850 disclosure,
• whether any owner contribution / distribution or other accounting is implicated by facts.

Worked Example: One Owner, Four Entities, Eight Related-Party Streams

Assume a private operating company—Orion Services LLC—is controlled by its founder.

The founder also controls:

• Orion Properties LLC
• Orion Management LLC
• Orion Equipment LLC

The founder’s spouse owns Family Consulting LLC.

During the year

Step 1: identify relationships

All four controlled entities plus the spouse-owned consulting business enter the related-party population.

Step 2: apply underlying accounting

• Lease → ASC 842
• Management/consulting → expense recognition under applicable guidance
• Equipment acquisition → fixed-asset accounting
• Owner loan → debt/interest guidance
• Guarantee → ASC 460 / other applicable analysis
• No-charge services → disclosure analysis despite no invoice

Step 3: reconcile

The related-party reconciliation identifies that Orion Management shows $115,000 receivable while Orion Services shows only $90,000 payable.

Investigation finds a $25,000 December management fee invoice not recorded by Orion Services.

That correction affects:

• expense,
• AP,
• related-party transaction total,
• ending due-to balance,
• disclosure.

Step 4: disclosure

The final note should explain:

• the founder/common-control relationships,
• spouse relationship,
• nature of lease/services/equipment/loan/guarantee transactions,
• transaction dollar amounts,
• amounts due to related parties,
• loan terms and settlement,
• material no-charge services/guarantee where relevant.

Step 5: arm’s-length language

If the company has not benchmarked rent, management fees, equipment pricing, consulting fees, and loan rates, it should not casually state that all arrangements were equivalent to arm’s-length transactions.

A Quarter-End Related-Party Accounting Workflow

Build a controlled related-party register

Suggested fields:

• Party ID
• Legal name
• Relationship type
• Owner / manager / family connection
• Control or significant-influence basis
• Effective date relationship began
• Effective date relationship ended
• Vendor/customer/employee IDs
• Transaction types
• Underlying accounting Topic
• Annual transaction amount
• Due from
• Due to
• Settlement terms
• Written contract?
• Governance approval?
• Consolidated elimination?
• Separate-statement disclosure?
• Arm’s-length assertion supported?
• Reviewer

ASC 850 Self-Review Checklist Before Manager Review

• Did I obtain the current legal-entity ownership chart?
• Did I identify all subsidiaries and affiliates?
• Did I identify equity-method investees?
• Did I identify principal owners?
• Did I identify current management?
• Did I identify immediate family members relevant to principal owners and management?
• Did I identify employee-benefit trusts managed by or under management trusteeship?
• Did I identify other parties that can control or significantly influence the entity?
• Did I identify parties influenced by the same owner or manager?
• Did I distinguish common ownership from common control?
• Did I document the basis for common-control conclusions?
• Did I refresh the population for ownership changes during the year?
• Did I refresh the population for management changes?
• Did I obtain conflict-of-interest / related-party certifications?
• Did I compare the related-party register with the vendor master?
• Did I compare it with the customer master?
• Did I compare it with payroll / employee records?
• Did I compare it with loan and debt schedules?
• Did I compare it with the lease population?
• Did I compare it with fixed-asset counterparties?
• Did I compare it with investment schedules?
• Did I compare it with tax-return ownership information?
• Did I review board / governance minutes for new relationships?
• Did I review legal agreements with owners and management?
• Did I identify significant unusual transactions?
• Did I identify vendor addresses overlapping management or owners?
• Did I identify entities with shared bank details or contact information?
• Did I identify related-party sales?
• Did I identify related-party purchases?
• Did I identify property or equipment transfers?
• Did I identify management/service arrangements?
• Did I identify legal/accounting/engineering services provided by affiliates?
• Did I identify leases and free use of property?
• Did I identify owner/affiliate loans?
• Did I identify guarantees?
• Did I identify common cost allocations?
• Did I identify tax-sharing arrangements?
• Did I identify no-charge services?
• Did I identify nominal-price transactions?
• Did I identify transactions settled through equity rather than cash?
• Did I determine the underlying accounting Topic for every material stream?
• Did I avoid assuming ASC 850 itself determines measurement?
• Did I evaluate ASC 606 for related-party revenue where applicable?
• Did I evaluate ASC 842 for related-party leases?
• Did I evaluate ASC 805-50 for common-control transfers?
• Did I evaluate ASC 460 for guarantees?
• Did I evaluate ASC 740 for tax-sharing arrangements?
• Did I evaluate ASC 810 for consolidation/VIE issues?
• Did I evaluate ASC 326 for related-party receivables subject to credit-loss guidance?
• Did I identify whether the transaction is eliminated in consolidated statements?
• Did I identify whether the same transaction remains in separate financial statements?
• Did I identify carve-out transactions that were formerly eliminated?
• Did I reconcile beginning intercompany / related-party balances?
• Did I reconcile current-period sales/purchases between counterparties?
• Did I reconcile management/service fees?
• Did I reconcile rent/lease activity?
• Did I reconcile loans and repayments?
• Did I reconcile interest income/expense?
• Did I reconcile cost allocations?
• Did I reconcile asset transfers?
• Did I reconcile cash settlements?
• Did I reconcile ending due-to/due-from balances?
• Did I investigate counterparty differences?
• Did I record unrecorded invoices or accruals?
• Did I identify differences that are actually contributions/distributions?
• Did I identify FX or timing differences?
• Did I avoid netting due-to and due-from solely because parties are related?
• Did I document the contractual or legal basis for offsetting if balances are netted?
• Did I document maturity and interest terms of related-party loans?
• Did I document whether balances are payable on demand?
• Did I document collateral or guarantees?
• Did I document the manner of settlement?
• Did I identify changes in how pricing or terms were established from the prior period?
• Did I evaluate whether a transaction qualifies as a common-control transfer?
• Did I avoid applying ASC 805 acquisition-method fair value to a true common-control transfer?
• Did I use the appropriate historical carrying amount for the receiving entity?
• Did I evaluate differences between transfer consideration and carrying amount as equity when applicable?
• Did I identify whether common-control presentation requires retrospective treatment under applicable guidance?
• Did I evaluate whether the related-party lease qualifies for the ASU 2023-01 practical expedient?
• If elected, did I use the written terms and conditions consistently for the qualifying arrangement?
• Did I document the practical-expedient election?
• Did I apply the common-control leasehold-improvement amortization rules?
• Did I still prepare ASC 850 lease disclosures?
• Did I identify off-market or unusual terms?
• Did I avoid describing a transaction as arm’s length without evidence?
• If arm’s-length equivalence is stated, did I retain market support?
• Did I document the method used to establish prices and terms?
• Did the disclosure describe the nature of each material relationship?
• Did the disclosure describe each material transaction stream?
• Did it include transactions with no or nominal recorded amounts where material?
• Did it include dollar transaction amounts for each income-statement period presented?
• Did it explain changes in how terms were established?
• Did it include amounts due from related parties at each balance-sheet date?
• Did it include amounts due to related parties at each balance-sheet date?
• Did it explain settlement terms when not otherwise apparent?
• Did I evaluate applicable ASC 740 tax-sharing disclosures?
• Did I avoid duplicating eliminated transactions in consolidated ASC 850 disclosure when not required?
• Did I identify common-control relationships requiring disclosure even with no transaction?
• Did I evaluate whether the relationship could cause results/financial position to differ significantly from an autonomous entity?
• Did I ensure the disclosure is consistent with contracts and governance records?
• Did I ensure it is consistent with the GL and reconciliations?
• Did I ensure it is consistent with debt, lease, tax, and guarantee notes?
• Can another accountant trace every disclosed amount back to the related-party register and supporting reconciliation?

100-Point ASC 850 Readiness Scorecard

Suggested readiness bands

• 90–100: Ready to own defined related-party close and disclosure workstreams with normal manager review.
• 82–89: Generally review-ready; targeted coaching remains in common-control, lease, or complex influence judgments.
• 72–81: Controlled ownership with manager checkpoints on completeness, special accounting, and disclosure.
• Below 72: Continue structured ASC 850 practice.

Override the score for concealed related parties, intentionally omitted transactions, fabricated arm’s-length support, manipulated intercompany balances, unsupported common-control conclusions, or disclosures designed to obscure owner/management economics.

A 30/60/90-Day Related-Party Accounting Training Plan

15 Realistic Related-Party Training Scenarios

1. Owner’s spouse becomes a vendor

Staff updates the related-party population and maps consulting expense/AP to the new relationship.

2. Affiliate provides free accounting staff

No invoice exists, but staff recognizes that a no-charge related-party transaction can still require disclosure.

3. Two companies have identical owners

Staff does not automatically call them entities under common control; the control analysis is documented first.

4. Subsidiary pays a management fee to Parent

The charge eliminates in consolidated statements but remains relevant in the subsidiary’s separate financial statements.

5. Carve-out entity has historical parent allocations

Staff recognizes that previously eliminated transactions may become visible related-party activity in carve-out statements.

6. $500K due from affiliate and $450K due to same affiliate

Staff does not automatically net the balances without the appropriate offsetting basis.

7. Intercompany balances differ by $75K

Staff identifies an unrecorded service invoice rather than forcing the elimination entry to balance.

8. Owner-controlled property company leases office space

Staff applies ASC 842 and ASC 850, evaluating the common-control practical expedient when eligible.

9. Private company has an unwritten common-control lease

Staff identifies whether written terms need to be documented and whether the ASU 2023-01 practical expedient is elected.

10. Business transferred between wholly owned subsidiaries

Staff evaluates ASC 805-50 historical carrying amounts instead of acquisition-method fair value.

11. Owner sells equipment to company for $900K

Staff applies the relevant asset accounting, documents terms, and does not assume ASC 850 mandates fair value.

12. Disclosure says “all transactions were arm’s length”

Staff requests benchmarking support or replaces the statement with factual pricing-method language.

13. Parent guarantees bank debt without fee

Staff identifies the no-charge related-party support and evaluates guarantee and disclosure requirements.

14. Common-control entities have no current-year invoices

Staff evaluates whether the control relationship itself requires disclosure because it could materially affect results or financial position.

15. Manager forms a side business midyear

Quarterly certification catches the new relationship before year-end rather than after the auditor asks about the vendor.

What CPA Firms Should Measure

Connect these measures to your Staff Accountant Competency Checklist, Accounting Employee Development Plan, Workpaper Review Checklist, and Accountants Shifting From Preparers to Reviewers.

Common Related-Party Accounting Training Mistakes

Mistake 1: Reuse last year’s related-party list

New owners, family entities, management side businesses, affiliates, and investees are never captured.

Mistake 2: Treat ASC 850 as the measurement rule

Staff fail to apply ASC 842, 805-50, 460, 740, 810, 326, or other underlying guidance.

Mistake 3: Assume common ownership means common control

A significant technical conclusion is made from percentages alone.

Mistake 4: Reconcile only ending balances

Unrecorded service fees and interest disappear inside forced elimination entries.

Mistake 5: Ignore free services

No invoice is interpreted as no transaction.

Mistake 6: Net due-to and due-from automatically

Related-party status is mistaken for a legal right of setoff.

Mistake 7: Apply acquisition-method fair value to a common-control transfer

Historical carrying amounts and equity treatment are missed.

Mistake 8: Treat a related-party lease like an informal arrangement with no accounting

ASC 842 and ASU 2023-01 requirements are skipped.

Mistake 9: Claim “arm’s length” because management says pricing is fair

No external market evidence supports the disclosure.

Mistake 10: Draft the footnote from last year’s wording

The disclosure is not rebuilt from current ownership, current transactions, reconciled balances, and current terms.

How SkillAbility Builds Related-Party Accounting Capability

BASE — Relationship and transaction completeness

• ASC 850 related-party definition
• ownership and management mapping
• vendor/customer matching
• transaction identification
• due-to/due-from reconciliation
• basic disclosure

MAPS — Cross-topic judgment

• Underlying GAAP selection
• common control
• related-party leases
• guarantees
• tax sharing
• separate vs consolidated reporting
• arm’s-length language

SUMMIT — Reviewer and governance readiness

• Review ownership/control conclusions
• challenge transaction completeness
• review common-control transfers
• review unusual owner/management transactions
• coordinate tax, legal, treasury, lease, and consolidation teams
• review related-party disclosures and governance controls
• coach staff without reconstructing the relationship map

Frequently Asked Questions About Related-Party Accounting Training

What is ASC 850?

ASC 850 is the U.S. GAAP Topic that provides disclosure requirements for related-party transactions and certain common-control relationships. Measurement of specific related-party transactions is often governed by other Topics.

Who is considered a related party under ASC 850?

Related parties include affiliates, certain equity-method investees, employee-benefit trusts managed by management, principal owners and immediate family members, management and immediate family members, and other parties with control or significant influence capable of affecting the parties’ separate interests.

Are transactions between a parent and subsidiary related-party transactions?

Yes. Parent-subsidiary and sibling-subsidiary transactions are common examples of related-party transactions, although transactions eliminated in consolidated financial statements generally need not be disclosed as related-party transactions in those consolidated statements.

Do related-party transactions have to be recorded at fair value?

Not automatically. ASC 850 does not provide one universal measurement rule. The applicable accounting Topic and the facts of the transaction determine recognition and measurement.

What must be disclosed under ASC 850?

Material related-party disclosures generally include the nature of the relationship, description and dollar amounts of transactions, effects of changes in how terms were established, amounts due to or from related parties, and settlement terms when not otherwise apparent.

Do no-charge related-party transactions require disclosure?

They can. ASC 850 specifically contemplates transactions to which no amount or only a nominal amount has been assigned.

Can financial statements say a related-party transaction was at arm’s length?

Only when that representation can be substantiated. ASC 850 says related-party transactions cannot be presumed to have occurred on arm’s-length terms.

What is the difference between a related party and an entity under common control?

Related party is the broader concept. Common control requires a control relationship over the entities. Entities may be related or commonly owned without meeting the accounting conclusion of common control.

How are common-control transfers accounted for?

ASC 805-50 generally requires the receiving entity in a common-control transfer to recognize transferred assets and liabilities at historical carrying amounts reflected in the ultimate parent’s financial statements rather than applying acquisition-method fair value.

Is goodwill created in a common-control transfer?

Generally no new acquisition goodwill is created from a true common-control transfer merely because consideration exceeds the historical carrying amount. Differences can be reflected in equity in separate financial statements.

How are related-party leases accounted for?

Related-party leases generally follow ASC 842 based on legally enforceable terms and conditions, subject to the optional ASU 2023-01 practical expedient for qualifying common-control arrangements of eligible entities.

What is the ASU 2023-01 common-control lease practical expedient?

Eligible private companies and NFPs that are not conduit bond obligors may elect to use the written terms and conditions of a qualifying common-control arrangement to determine whether a lease exists and its subsequent accounting and classification.

Do related-party leases still need ASC 850 disclosure?

Yes. The lease accounting under ASC 842 does not replace related-party disclosure requirements.

Can due-to and due-from related-party balances be netted?

Not simply because the parties are related. Offsetting should follow the applicable accounting requirements and legal rights rather than related-party status alone.

Do common-control relationships require disclosure if there are no transactions?

They can. ASC 850 requires disclosure of the nature of certain common-ownership or management-control relationships when the control could cause operating results or financial position to differ significantly from what would occur if the entities were autonomous.

Do intercompany transactions require related-party disclosure in consolidated financial statements?

ASC 850 generally does not require disclosure of transactions that are eliminated in preparing consolidated or combined financial statements, though the same activity may require disclosure in separate or carve-out financial statements.

How should staff identify undisclosed related parties?

Useful sources include ownership records, management and family certifications, vendor/customer masters, legal contracts, tax records, investment schedules, lease/loan schedules, organizational charts, and significant unusual transaction reviews.

Why are related-party reconciliations important?

They verify both the activity and balances that feed the financial statements and ASC 850 disclosures and can uncover unrecorded invoices, interest, misclassifications, settlement differences, or omitted transactions.

Does ASC 850 apply to public and private companies?

Yes. The core U.S. GAAP ASC 850 disclosure requirements apply to both public and nonpublic entities, although public companies can have additional SEC disclosure and governance requirements.

How do you know when a staff accountant is review-ready for related-party accounting?

A review-ready staff accountant can build the party population, identify transaction streams, apply the correct underlying GAAP, reconcile both sides, distinguish consolidated and separate reporting, handle common-control issues, challenge arm’s-length wording, and produce a complete ASC 850 disclosure package.

Current Research and Authority Resources

• Deloitte DART — ASC 850 Related Party Disclosures Overview
• Deloitte — Related-Party Transactions and ASC 850 Disclosure Requirements
• Deloitte — Related-Party Leases, August 2026 Roadmap
• FASB — ASU 2023-01, Leases: Common Control Arrangements
• Deloitte — Common-Control Transactions Under ASC 805-50
• PCAOB — AS 2410 Related Parties
• PCAOB — February 2026 Related-Party Transactions Audit Focus
• Google Search Central — Optimizing for Generative AI Features

Related-party accounting can intersect with ASC 842 leases, ASC 805-50 common-control transfers, ASC 810 consolidation and VIEs, ASC 460 guarantees, ASC 740 income taxes, ASC 326 credit losses, ASC 606 revenue, debt and equity guidance, nonmonetary transactions, and SEC reporting rules. Verify current authoritative guidance and transaction-specific facts for live work.

The Bottom Line

Related-party accounting training should not produce staff who can only update last year’s footnote.

It should produce accountants who can prove the relationship population and reconcile the economics behind the disclosure.

Identify the related party before searching for transactions.

Search systems—not only questionnaires—for undisclosed relationships.

Map every material transaction to the underlying accounting Topic.

Distinguish common ownership from common control.

Reconcile both transaction activity and ending balances.

Know what eliminates in consolidation and what remains in separate statements.

Use historical carrying amounts when ASC 805-50 applies.

Apply the current common-control lease rules where appropriate.

Do not ignore no-charge transactions.

Do not claim arm’s-length pricing without support.

Build ASC 850 disclosure from the current reconciliation—not from last year’s wording.

That is RELATED READY.

Protect Knowledge. Develop People. Scale the Firm.

To staff who can explain the relationship before review has to reconstruct it,

Vincent Howard, CPA
Managing Partner, Howard, Howard and Hodges
SkillAbility for Accounting Firms

© 2026 SkillAbility for Accounting Firms. This article provides general educational information and does not replace client-specific U.S. GAAP, audit, tax, legal, SEC, valuation, governance, or other professional advice.