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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

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 11mo ago
> You're ignoring what I'm saying. This has nothing to do with related parties. I don’t understand what’s “this” that has nothing to do with related parties. Your first comment “If its equity accounted it won't be considered a related party as far as I understand. Related party in IFRS isnt what you think it is.” and your second comment “It's not a related party that's the point.” were about what is a “related party” and about nothing else! You write that “Microsoft applies the equity method because it has significant influence over OpenAI”. According to IFRS “An associate is an entity over which the investor has significant influence.” That makes an OpenAI an associate of Microsoft given your previous claim. Agree or disagree? According to IFRS “An entity is related to a reporting entity if […] One entity is an associate or joint venture of the other entity”. In this case one entity is an associate to the other. It doesn’t give to any particular “entity” in that definition the “reporting” role - it says just “one” and “the other”. That makes OpenAI a related entity to Microsoft if Microsoft has significant influence on OpenAI.
kgwgk 11mo ago
> In this case: Microsoft applies the equity method because it has significant influence over OpenAI https://www.ifrs.org/content/dam/ifrs/supporting-implementation/smes/module-33.pdf https://www.ifrs.org/content/dam/ifrs/supporting-implementat... IFRS® Foundation — Supporting Material for the IFRS for SMEs Standard Module 33 — Related Party Disclosures —— Ex 4 Parent entity […] has significant influence over associates 1 and 2. For Parent's separate financial statements […] associates 1, 2 […] are related parties (see paragraph 33.2(b)(i) and (ii)). […] —— Ex 13 Entity S has significant influence over Entity T. […] Entity T is an associate of Entity S. Entities S and T are related parties (see paragraph 33.2(b)(ii)). […] —— In the previous example, set Entity S = Microsoft and Entity T = OpenAI : Premise: Microsoft has significant influence over OpenAI. Conclusion: OpenAI is an associate of Microsoft. Microsoft and OpenAI are related parties (see paragraph 33.2(b)(ii)).
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- KoolKat23 11mo ago
  Correct. Under IFRS, the definition in IAS 24 / Section 33 of the IFRS for SMEs explicitly includes associates and their investors as related parties. So if Microsoft reports under IFRS, OpenAI would indeed be a related party. Under U.S. GAAP (ASC 850), however, the definition is narrower. “Related parties” include affiliates, principal owners, management, and members of their immediate families—but associates accounted for under the equity method are not automatically treated as related parties unless reciprocal influence or common control exists. So: IFRS → associates are always related parties (disclosure under IAS 24.9(b)). U.S. GAAP → equity-method investees are not necessarily related parties unless additional factors apply. Microsoft reports under U.S. GAAP, not IFRS, so OpenAI is not a related party in Microsoft’s filings. Disclosures still occur in “Investments” or “Strategic Partnerships,” not under “Related Party Transactions.”
  - kgwgk 11mo ago

kgwgk 11mo ago

> You're ignoring what I'm saying. This has nothing to do with related parties. I don’t understand what’s “this” that has nothing to do with related parties. Your first comment “If its equity accounted it won't be considered a related party as far as I understand. Related party in IFRS isnt what you think it is.” and your second comment “It's not a related party that's the point.” were about what is a “related party” and about nothing else! You write that “Microsoft applies the equity method because it has significant influence over OpenAI”. According to IFRS “An associate is an entity over which the investor has significant influence.” That makes an OpenAI an associate of Microsoft given your previous claim. Agree or disagree? According to IFRS “An entity is related to a reporting entity if […] One entity is an associate or joint venture of the other entity”. In this case one entity is an associate to the other. It doesn’t give to any particular “entity” in that definition the “reporting” role - it says just “one” and “the other”. That makes OpenAI a related entity to Microsoft if Microsoft has significant influence on OpenAI.

kgwgk 11mo ago

> In this case: Microsoft applies the equity method because it has significant influence over OpenAI https://www.ifrs.org/content/dam/ifrs/supporting-implementation/smes/module-33.pdf https://www.ifrs.org/content/dam/ifrs/supporting-implementat... IFRS® Foundation — Supporting Material for the IFRS for SMEs Standard Module 33 — Related Party Disclosures —— Ex 4 Parent entity […] has significant influence over associates 1 and 2. For Parent's separate financial statements […] associates 1, 2 […] are related parties (see paragraph 33.2(b)(i) and (ii)). […] —— Ex 13 Entity S has significant influence over Entity T. […] Entity T is an associate of Entity S. Entities S and T are related parties (see paragraph 33.2(b)(ii)). […] —— In the previous example, set Entity S = Microsoft and Entity T = OpenAI : Premise: Microsoft has significant influence over OpenAI. Conclusion: OpenAI is an associate of Microsoft. Microsoft and OpenAI are related parties (see paragraph 33.2(b)(ii)).

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KoolKat23 11mo ago
Correct. Under IFRS, the definition in IAS 24 / Section 33 of the IFRS for SMEs explicitly includes associates and their investors as related parties. So if Microsoft reports under IFRS, OpenAI would indeed be a related party. Under U.S. GAAP (ASC 850), however, the definition is narrower. “Related parties” include affiliates, principal owners, management, and members of their immediate families—but associates accounted for under the equity method are not automatically treated as related parties unless reciprocal influence or common control exists. So: IFRS → associates are always related parties (disclosure under IAS 24.9(b)). U.S. GAAP → equity-method investees are not necessarily related parties unless additional factors apply. Microsoft reports under U.S. GAAP, not IFRS, so OpenAI is not a related party in Microsoft’s filings. Disclosures still occur in “Investments” or “Strategic Partnerships,” not under “Related Party Transactions.”
- kgwgk 11mo ago