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No, these are separate subjects with specific definitions (it's a specific name not a phrase of speech). I struggle to explain it briefly as it's an entire subj

No, these are separate subjects with specific definitions (it's a specific name not a phrase of speech). I struggle to explain it briefly as it's an entire subject and I might be lambasted here for wrongly simplifying as it's nuanced. Ill give it a go (it's been 15 years since the textbooks). Equity accounted for investments imply it's treated as one and the same as the business, the individual entries will be included with the rest of the entries related to the business being reported on. Related parties are considered external and are basically reported "at arms length". This still doesn't necessarily mean they're providing you with the consolidated results to make matters more confusing. Separately, They're required to report intercompany transactions with related parties (specific meaning) as there is a lack of visibility on the innerworkings of that related party business (it's external and not included) and the potential conflict of interest exists as they're related and could be used to skew the ratios/reporting of the reported entities results.

kgwgk 1y ago
What do you object to exactly? 1) OpenAI is an “associate” of Microsoft in the IAS 28 sense (which is the reason why it accounts for the investment using the equity method). 2) OpenAI is a related entity to Microsoft in the IAS 24 sense because of (1) If you disagree with the points above how does that fit with the relevant standards? ——— For what it’s worth ChatGPT tells me the following: If Microsoft has significant influence over OpenAI (as implied by equity-method accounting), then: OpenAI is a related party of Microsoft; and Microsoft must disclose the nature of the relationship and any material transactions between them (e.g., cloud services, licensing, revenue sharing). ——— IAS 24 - Related Party Disclosures https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-24-related-party-disclosures.pdf?bypass=on https://www.ifrs.org/content/dam/ifrs/publications/pdf-stand... A related party is a person or entity that is related to the entity that is preparing its financial statements (in this Standard referred to as the 'reporting entity'). […] (b) An entity is related to a reporting entity if any of the following conditions applies:[…] (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). […] A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. —- IAS 28 - Investments in Associates and Joint Ventures https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-28-investments-in-associates-and-joint-ventures.pdf?bypass=on https://www.ifrs.org/content/dam/ifrs/publications/pdf-stand... The following terms are used in this Standard with the meanings specified: An associate is an entity over which the investor has significant influence. […] An entity with joint control of, or significant influence over, an investee shall account for its investment in an associate or a joint venture using the equity method except when that investment qualifies for exemption in accordance with paragraphs 17-19. ——— Edit: I wrote about IRFS below but US GAAP seems similar. What are the “specific definitions” you mention? https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/technical/accountinglink/documents/ey-frd02230-161us-06-27-2025.pdf https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/... An investor and its equity method investee are considered related parties under ASC 850 and should disclose material intra-entity transactions as related-party transactions. https://arch.bdo.com/getContentAsset/b40b6cee-4d4f-4182-bf43-2807426391f6/bb620d56-5e9c-4774-8d17-fb9323eefdf4/Equity-Method-of-Accounting-Under-ASC-323-BDO-Blueprint-08-25.pdf https://arch.bdo.com/getContentAsset/b40b6cee-4d4f-4182-bf43... DISCLOSURE REQUIREMENTS Related-party transactions An equity method investment and an investment accounted for using the fair value option are related parties to the investor, as defined in ASC 850. The investor must provide disclosures about related-party transactions with such entities, including: The nature of the relationship A description of transactions, including the amounts Amounts due to or from the investee.
- KoolKat23 11mo ago
  >If Microsoft has significant influence over OpenAI (as implied by equity-method accounting), then: OpenAI is a related party of Microsoft; and Microsoft must disclose the nature of the relationship and any material transactions between them (e.g., cloud services, licensing, revenue sharing). No this is wrong.
  - kgwgk 11mo ago
    You have made that opinion clear, you’ve said that multiple times. However, you have not given any indication of why would that be wrong (substantiated in references). You wrote “Related party in IFRS isn't what you think it is”- but you have not commented on the IFRS definition of related party that I quoted above (and repeat below). Are you thinking of a different IFRS definition? “An entity is related to a reporting entity if any of the following conditions applies:[…] One entity is an associate or joint venture of the other entity […]”
    - KoolKat23 11mo ago
      You're ignoring what I'm saying. This has nothing to do with related parties. It's not simply a definition and it's not an opinion, this took a semester to put the pieces together. I've explained why it's treated as such in my prior answer. As I say it's been a while for me. I've given chatgpts reply to your prior point. They've explained it better. Equity-method accounting does not automatically mean the investee (OpenAI) is a “related party” under U.S. GAAP (ASC 850) unless there is control or common control, or one party can significantly influence operating or financial policies of the other in both directions. In this case: Microsoft applies the equity method because it has significant influence over OpenAI, but OpenAI does not have reciprocal influence over Microsoft. Therefore, OpenAI is not a related party of Microsoft under GAAP. Microsoft may disclose the nature of the investment and transactions (e.g., Azure hosting, licensing), but not as related-party disclosures—they appear in other sections (e.g., “Investments” or “Revenue from strategic partners”). In short: → Equity method ≠ related party. → Disclosure still required, but not under related-party rules.

kgwgk 1y ago

What do you object to exactly? 1) OpenAI is an “associate” of Microsoft in the IAS 28 sense (which is the reason why it accounts for the investment using the equity method). 2) OpenAI is a related entity to Microsoft in the IAS 24 sense because of (1) If you disagree with the points above how does that fit with the relevant standards? ——— For what it’s worth ChatGPT tells me the following: If Microsoft has significant influence over OpenAI (as implied by equity-method accounting), then: OpenAI is a related party of Microsoft; and Microsoft must disclose the nature of the relationship and any material transactions between them (e.g., cloud services, licensing, revenue sharing). ——— IAS 24 - Related Party Disclosures https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-24-related-party-disclosures.pdf?bypass=on https://www.ifrs.org/content/dam/ifrs/publications/pdf-stand... A related party is a person or entity that is related to the entity that is preparing its financial statements (in this Standard referred to as the 'reporting entity'). […] (b) An entity is related to a reporting entity if any of the following conditions applies:[…] (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). […] A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. —- IAS 28 - Investments in Associates and Joint Ventures https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-28-investments-in-associates-and-joint-ventures.pdf?bypass=on https://www.ifrs.org/content/dam/ifrs/publications/pdf-stand... The following terms are used in this Standard with the meanings specified: An associate is an entity over which the investor has significant influence. […] An entity with joint control of, or significant influence over, an investee shall account for its investment in an associate or a joint venture using the equity method except when that investment qualifies for exemption in accordance with paragraphs 17-19. ——— Edit: I wrote about IRFS below but US GAAP seems similar. What are the “specific definitions” you mention? https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/technical/accountinglink/documents/ey-frd02230-161us-06-27-2025.pdf https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/... An investor and its equity method investee are considered related parties under ASC 850 and should disclose material intra-entity transactions as related-party transactions. https://arch.bdo.com/getContentAsset/b40b6cee-4d4f-4182-bf43-2807426391f6/bb620d56-5e9c-4774-8d17-fb9323eefdf4/Equity-Method-of-Accounting-Under-ASC-323-BDO-Blueprint-08-25.pdf https://arch.bdo.com/getContentAsset/b40b6cee-4d4f-4182-bf43... DISCLOSURE REQUIREMENTS Related-party transactions An equity method investment and an investment accounted for using the fair value option are related parties to the investor, as defined in ASC 850. The investor must provide disclosures about related-party transactions with such entities, including: The nature of the relationship A description of transactions, including the amounts Amounts due to or from the investee.

KoolKat23 11mo ago
>If Microsoft has significant influence over OpenAI (as implied by equity-method accounting), then: OpenAI is a related party of Microsoft; and Microsoft must disclose the nature of the relationship and any material transactions between them (e.g., cloud services, licensing, revenue sharing). No this is wrong.
- kgwgk 11mo ago
  You have made that opinion clear, you’ve said that multiple times. However, you have not given any indication of why would that be wrong (substantiated in references). You wrote “Related party in IFRS isn't what you think it is”- but you have not commented on the IFRS definition of related party that I quoted above (and repeat below). Are you thinking of a different IFRS definition? “An entity is related to a reporting entity if any of the following conditions applies:[…] One entity is an associate or joint venture of the other entity […]”
  - KoolKat23 11mo ago
    You're ignoring what I'm saying. This has nothing to do with related parties. It's not simply a definition and it's not an opinion, this took a semester to put the pieces together. I've explained why it's treated as such in my prior answer. As I say it's been a while for me. I've given chatgpts reply to your prior point. They've explained it better. Equity-method accounting does not automatically mean the investee (OpenAI) is a “related party” under U.S. GAAP (ASC 850) unless there is control or common control, or one party can significantly influence operating or financial policies of the other in both directions. In this case: Microsoft applies the equity method because it has significant influence over OpenAI, but OpenAI does not have reciprocal influence over Microsoft. Therefore, OpenAI is not a related party of Microsoft under GAAP. Microsoft may disclose the nature of the investment and transactions (e.g., Azure hosting, licensing), but not as related-party disclosures—they appear in other sections (e.g., “Investments” or “Revenue from strategic partners”). In short: → Equity method ≠ related party. → Disclosure still required, but not under related-party rules.