3. Objective
• 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.
4. DEFINITION
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
5. •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.
6. EXCLUSION
• Purchase of goods within the scope of IAS 32 & 39
• Issue of shares to acquire the net assets in a business
combination
7. 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.
Alternatively,
• Equity instruments (including shares or share options) of the entity or
another group entity.
This type is called equity-settled share-based payment.
8.
9. Vesting condition
Some share-based payment transactions include vesting
conditions that must be met before any payment is made.
IFRS 2 recognizes 2 types of vesting conditions:
• Service conditions: they require the counterparty to complete a
specified period or service
• 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
10. CONT…
• IFRS 2 does not apply to share-based payment
transactions other than for the acquisition of
goods and services.
• Not applied to:
Share dividends,
purchase of treasury shares,
issuance of additional shares
11. 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.
12. 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.
13. MEASUREMENT
Non-Employees Employees
• IFRS 2 measures the amount
of transaction at fair value of
the goods or services
received.
- Fair value of liability is
measured at the end of each
reporting date until they are
settled.
• In case of transaction with
employees, FV of goods &
services cannot be measured
reliably. Therefore Entity
should measure their value by:
- FV of the equity instrument
granted
- Entity should measure the
services received from the
employees at the grant date.
14. MODIFICATIONS
IFRS 2 clarifies that the guidance on modifications also
applies to instruments modified after their vesting date
• If FV of New Instruments > Old Instruments , incremental cost is
recognized based on vesting period in the similar manner to the
original amount
• If the fair value of the new instruments < FV of the old instruments,
the original fair value of the equity instruments granted should be
expensed as if the modification never occurred.
• If the modification happens after the vesting period, the expense is
realized Immediately
15. SETTLEMENTS OR CANCELLATION
Settlements or Cancellation leads to acceleration of
vesting period, therefore, any unrecognized amounts
should be recognized immediately.
• 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
16. DISCLOSURE
• To understand the nature & extent of the share based
payment that existed during the period.
• To understand the FV of the goods/services received
against the equity instruments granted to the vendor
• To understand effect of expenses from share based
transaction on the Income Statement
