Corporate Accounting: J.P Morgan Chase Bank Essay

Question:

Discuss about the Corporate Accounting for J.P Morgan Chase Bank.

Answer:

Assigned Name of the Company

Related Party Category

Type of Related Party Transaction

Related Party Amount

J.P. Morgan Chase Bank

Related Party

Purchase

$15,070,316

J.P. Morgan Chase Bank

Related Party

Purchase (Common Stock)

$13,147,745

J.M Smucker Company

Related Party

Purchase (Common Stock)

$164,211

American Century

Related Party

Transfer under finance agreement

$3,386,703

Critical evaluation of the related party transaction of J.P Morgan Chase Bank and J.M Smucker Company:

The related party transaction of Procter and Gamble represents a certain plan of the company for investment in shares of mutual funds that is managed by the J.P Morgan Chase Bank. It is worth mentioning that J.P Morgan Chase Bank is the trustee that is defined by the plan and therefore, the above stated transaction qualify as the party-in-interest transactions. Additionally, the amount of fees that is paid relating to the investment management service were included as the reduction of the return earned on each of the fund (Roth 2016).

A related party transaction can be regarded as the transaction that can be regarded as the transfer of resources, service or any other forms of obligations amid the reporting entity along with its related party (Fang et al. 2016). A related person transaction will be regarded as approved if after the complete disclosure of the related party interest in the transaction authorised in compliance with the standards has been set forth under section II and the process set forth under section III.

The committee of Procter and Gamble Australian Private Limited might approve a related party transaction presented to it given if it only presented to all the information presented. The transaction is not inconsistent with best interest of the company as the whole (Balsam, Gifford and Puthenpurackal 2017). The committee might in its sole direction, impose such terms and conditions as they deem appropriate on the organization or associated with the related parson in association with the approval of the related party transaction.

All the related party transaction of Procter and Gamble are reviewed by the external chartered accounting firm so that it can make sure that transactions are in accordance with the ordinary course of the business. The transactions should be based on arm’s length and must be placed before the audit committee for the purpose of quarterly review. The related party transactions that are entered into by the company are in best interest of the organization and are in accordance with the provision of the AASB 124.

Investment in securities are usually exposed to numerous risk in the form of interest risk, credit risk and overall market volatility. The related party transactions are valued at market price for Procter and Gamble so that it can create value for its stakeholders.

Consistency of Disclosures:

Disclosure that is made by the Procter and Gamble Australia Private Limited is in line with the AASB 124. Investment that is made in the common stock are recorded at cost and the related party transaction are constantly measured at cost. The plan administrator did not identified any form of prohibited party in investments or transactions at the time reported during the year ended 2016. On understanding any form transaction involving a related party transaction, the chief legal officer would gather the obligatory evidence concerning the transaction and determine whether it is related to person transaction within the purview of the policy (Jia, Shi and Wang 2013).

The audit committee in accordance with the AASB 124 approves the related party transaction that is inconsistent with the best interest of the organization as the whole and it is compliance with the relevant legislation. Interest originating from the direct and indirect ownership by the related party transition is aggregated of lower than 10% equity shall be deemed to be a material interest in other firms which represents a related party transaction.

The related party transactions policy has been adopted by the company to make sure that they are in compliance with the RTP policy and the same is reviewed before the audit committee on quarterly basis. The audit committee reviews the disclosure of any kind of related party transactions on quarterly basis prior to the submission of the board for approval.

Reference List:

Balsam, S., Gifford, R.H. and Puthenpurackal, J., 2017. Related Party Transactions, Corporate Governance and CEO Compensation. Journal of Business Finance & Accounting, 44(5-6), pp.854-894.

Fang, J., Lobo, G.J., Zhang, Y. and Zhao, Y., 2017. Auditing Related Party Transactions: Evidence from Audit Opinions and Restatements. Auditing: A Journal of Practice and Theory.

Jia, N., Shi, J. and Wang, Y., 2013. Coinsurance within business groups: Evidence from related party transactions in an emerging market. Management Science, 59(10), pp.2295-2313.

Roth, M., 2016. Related party transactions.

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