IFRS 2 - Share Based payments

Some entities issue shares or share options to pay suppliers, such as suppliers of professional services.IFRS 2 requires an entity to recognise share-based

payment transactions in its financial statements. Equity-settled share-based payment transactions are

generally those in which shares, share options or other equity instruments are granted to employees or other parties in return for goods or services.

Cash-settled share-based payment transactions are generally those to be settled in cash or other assets.They are share-based because the payment amount is

based on the price of the entity’s shares.

The share-based payment transaction is recognised when the entity obtains the goods or services.Goods or services received are recognised as assets or

expenses as appropriate.

The transaction is recognised as equity (if equity-settled) or as a liability (if cash-settled).

Equity-settled share-based payment transactions are measured at the fair value of the goods or services received. If the fair value of the goods or services

cannot be estimated reliably, the fair value of the equity instruments at grant date is used.

* In the case of employee and similar services it is difficult to estimate reliably the fair value of additional benefits received by the entity, so the fair

value of the equity instruments measured at grant date is used instead.
   
* In other cases there is a rebuttable presumption that the fair value of the goods or services received can be estimated reliably. If not, the fair value of

the equity instruments is used instead. If the identifiable consideration received is less than the fair value of the equity instruments granted or the

liability incurred, the unidentifiable goods or services are measured by reference to the difference between the fair value of the equity instruments granted

 (or liability incurred) and the fair value of the goods or services received at grant date. In other cases, the fair value is measured at the date the

entity obtains the goods or services.

Cash-settled share-based payments are measured at the fair value of the liability. The liability is remeasured at the end of the reporting period and at the

date of settlement.Changes in value are recognized in profit or loss. In some cases, the entity or the other party may choose whether the transaction is

settled in cash or by issuing equity instruments.The accounting treatment depends on whether the entity or the counter party has the choice.

Additional articles about IFRS

About the author

Nitin Soni, content writer at PIRON Corporation. PIRON is a leading provider of learning management system and Content Development, based out of USA and India.

Please Rate This Article

Select Rating Excellent Very Good Interesting Fair Could Use Improvement

Number of ratings: 0
Rating: 0