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arm's length


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1. Denoting a transaction entered into by unrelated parties, each acting in their own best interests in paying or charging prices based on fair market values. In the preparation of financial statements it is normally assumed that all transactions are conducted at arm’s length, although it is appreciated that this may not be the case with companies belonging to the same group, who make special arrangements between themselves for taxation or other reasons. Because of the possibility of transactions being carried out at other than arm’s length and the reader of financial statements being unaware of this fact, Financial Reporting Standard 8, Related Party Disclosures, was issued in 1995. From 1 January 2005 this was superseded for listed companies by International Accounting Standard 24. See related parties; related party transactions. 2. Denoting an investment portfolio in which the owner is not aware of the asset composition or the transactions entered into. See blind trust.

1. Denoting a transaction entered into by unrelated parties, each acting in their own best interests in paying or charging prices based on fair market values. In the preparation of financial statements it is normally assumed that all transactions are conducted at arm’s length, although it is appreciated that this may not be the case with companies belonging to the same group, who make special arrangements between themselves for taxation or other reasons. Because of the possibility of transactions being carried out at other than arm’s length and the reader of financial statements being unaware of this fact, Financial Reporting Standard 8, Related Party Disclosures, was issued in 1995. From 1 January 2005 this was superseded for listed companies by International Accounting Standard 24. See related parties; related party transactions. 2. Denoting an investment portfolio in which the owner is not aware of the asset composition or the transactions entered into. See blind trust.

Subjects: Economics — Accounting.


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