IFRS 2 - Share Based Payment

2. AGENDA
 Objective
 Definition
 Exclusion
 Accounting & Recognition
 Measurement
 Modification, Cancellation & Settlements
 Disclosures

3. DEFINITION
 The Objective of IFRS 2 Share based payment is to specify the financial
reporting by an entity when it undertakes a share-based payment
transactions.
OBJECTIVE
 Share based payment transaction is a transaction in which the entity:
 Receives goods or services from the supplier (including employee) in a
share based payment arrangement; or
 Incurs an obligation to settle the transaction with the supplier in a share
based payment arrangement when another group entity receives those
goods or services.

4. EXCLUSION
 Purchase of goods within the scope of IAS 32 & 39
 Issue of shares to acquire the net assets in a business combination
 Purchase of own shares from employee on the FV of shares

5. SHARE BASED ARRANGEMENT
Share based payment arrangement is an agreement between the entity and
another party (including an employee) whereby the other party receives
• Cash or other assets of the entity for amount that are based on the price
(or value) of equity instruments (including shares or share options) of
the entity or another group entity.
• This type of arrangement is Cash settled share-based payment
transaction
• Equity instruments (including share or share options) of the entity or
another group entity.

6. VESTING CONDITIONS
Vesting :- The vesting schedule set up by the company determines when
the employee acquires full ownership of asset
IFRS 2 recognises 2 types of vesting conditions:
 Service conditions:- They require the counterparty to complete a
specified period of services;
 Performance conditions:- They require the counterparty to complete a
specified period of services AND specified performance targets to be
met.
A performance condition might include a market condition that is linked
to the market price of shares in some way, for example, vesting might
depend on achieving a minimum increase in the share price of the
entity.

7. RECOGNITION PRINCIPLE
1) The basic recognition criteria is to recognize goods or services received
in as share based payment transaction when the goods are obtained or
services are received.
Good or services acquired should be recognized as expense in profit or
loss unless they qualify for recognition of assets. That the debit side of
an accounting entry.
2) The credit side depend on the type of share-based payment
arrangement:
If goods or services were acquired in an equity-settled share based
payment transaction, then the corresponding increase is recognized in
equity.
If goods or services were acquired in a cash-settled share based
payment transaction, then the corresponding increase is recognized as
a liability.

8. MEASUREMENT
Non-Employees Employees
IFRS 2 measures the amount
of transaction at fair value of
the goods or services
received.
In case of transaction with employees,
FV of goods & services cannot be
measured reliably. Therefore Entity
should measure their value by:
- Fair value of liability is
measured at the end of each
reporting date until they are
settled.
- FV of the equity instrument granted
- Entity should measure the services
received from the employees at the
grant date.

9. MODIFICATIONS
Modification clarifies that the guidance on modifications also applies to
instruments modified after their vesting date
1) If FV of New Instruments > Old Instruments , incremental cost is
recognized based on vesting period in the similar manner to the
original amount
2) If the fair value of the new instruments is less than the fair value of the
old instruments, the original fair value of the equity instruments granted
should be expensed as if the modification never occurred.
3) If the modification happens after the vesting period, the expense is
realized Immediately

10. SETTLEMENTS OR CANCELLATION
Settlements or Cancellation leads to acceleration of vesting period,
therefore, any unrecognized amounts should be recognized
immediately in the PL.
• Any payments made with the cancellation or settlement (up to the fair
value of the equity instruments) should be accounted for as the
repurchase of an equity interest.
• Any payment in excess of the fair value of the equity instruments
granted is recognized as an expense

11. DISCLOSURE
1. To understand the nature & extent of the share based payment that
existed during the period.
2. To understand the FV of the goods/services received against the equity
instruments granted to the vendor
3. To understand effect of expenses from share based transaction on the
Income Statement