Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director, whether executive or otherwise, of that entity. The definition is set out in IAS 24 Related Party Disclosures, paragraph 9, and it carries a consequence: a member of an entity’s key management personnel is a related party of that entity (IAS 24 as adopted in EU law, paragraph 9).
The same three words name a different thing in US defense contracting, where KMP is a list of company officials tied to a facility clearance under 32 CFR 117.3 (eCFR, 32 CFR 117.3). Both tests turn on authority over an entity’s management, but one drives a financial statement disclosure and the other drives a security eligibility determination, so the populations and the consequences do not line up.
Who Is In, and Why the Job Title Does Not Decide
Two parts of the wording do the work. The authority has to reach planning, directing and controlling the activities of the entity, so a manager with a large budget inside a single function can still sit outside the group. And any director is in, executive or not, which catches a board member who holds no executive role (IAS 24, paragraph 9).
Membership reaches past the individual. Being key management personnel of the reporting entity or of its parent makes a person a related party, and close members of that person’s family are related on the same footing (IAS 24, paragraph 9).
What Has to Be Disclosed
An entity shall disclose key management personnel compensation in total and for each of five categories: short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits, and share-based payment (IAS 24, paragraph 17).
An entity that obtains key management personnel services from a separate management entity is not required to apply paragraph 17 to the compensation that management entity pays its own employees or directors. It discloses the amounts it incurred for those services instead, and the management entity is itself a related party of the reporting entity (IAS 24, paragraphs 17A, 18A and 9(b)(viii), as amended).
Compensation is defined widely for that purpose. It takes in all employee benefits as defined in IAS 19 Employee Benefits, including the benefits to which IFRS 2 Share-based Payment applies, so equity awards belong in the note alongside salary (IAS 24, paragraph 9).
Where a US Firm Meets the Term
The work is an IFRS engagement: preparing, reviewing or auditing the related party note for a client reporting under IFRS Accounting Standards (IFRS Foundation, IAS 24). The US vocabulary for the same ground is different.
FASB Statement No. 57 Related Party Disclosures carried the US definition (FASB Statement No. 57). It was superseded when the FASB Accounting Standards Codification became the source of authoritative US generally accepted accounting principles, effective for financial statements issued for interim and annual periods ending after September 15, 2009 (FASB Statement No. 168).
That Statement defined management as persons who are responsible for achieving the objectives of the enterprise and who have the authority to establish policies and make decisions by which those objectives are to be pursued. It added that management normally includes members of the board of directors, the chief executive officer, the chief operating officer, vice presidents in charge of principal business functions, and other persons who perform similar policymaking functions, and that persons without formal titles may be members of management too. Its glossary defined affiliate, control, immediate family, management, principal owners and related parties (FASB Statement No. 57, paragraph 24). The phrase key management personnel is not among them, so the population for an IFRS note is identified against the IAS 24 test rather than lifted from a US officer list (IAS 24, paragraph 9).
The gap is wider than vocabulary, and it is not the kind of measurement difference that moves a number in the workpapers. IAS 24 requires a key management personnel compensation note, while Statement No. 57 required disclosure of material related party transactions other than compensation arrangements, expense allowances and other similar items in the ordinary course of business (FASB Statement No. 57, paragraph 2). A preparer moving a client between the two frameworks is not just renaming a population, they are adding or removing a note.
What It Is Commonly Confused With
KMP on a Facility Clearance
For a cleared US defense contractor, KMP means an entity’s senior management official, facility security officer, insider threat program senior official, and all other entity officials who either hold majority interest or stock in, or have direct or indirect authority to influence or decide issues affecting the management or operations of, the entity or classified contract performance (eCFR, 32 CFR 117.3). That is a clearance test, not a financial reporting one.
A Key Employee on Form 990
Key employee is a separate defined term for a US exempt organization, not a synonym. Under the 2025 Instructions for Form 990, a current key employee is an employee other than an officer, director or trustee who passes three tests in order: reportable compensation over $150,000 from the organization and all related organizations, a responsibility test, and a top 20 test that keeps only the 20 highest paid of those who clear the first two (Instructions for Form 990, Part VII).
Common Questions
A chief financial officer normally qualifies, and the reason is the authority rather than the title: the role carries authority and responsibility for planning, directing and controlling the activities of the entity. A finance lead whose remit stops at bookkeeping and reporting for one subsidiary, with no say over the entity’s activities, is assessed on that fact instead (IAS 24, paragraph 9).
FCL means an administrative determination that, from a security viewpoint, an entity is eligible for access to classified information of a certain level and all lower levels (eCFR, 32 CFR 117.3). It is a determination about an entity rather than about a person, and it comes from the same security rule that uses KMP for its own list of officials.
Accountably places trained offshore accountants and tax preparers inside US CPA and EA firms, and a firm can run a block of its own recurring compliance work through a trial task so its own reviewers stay on judgment calls like related party identification.
