Share base payments

Question 1

What are the 2 types of share based payment?

Answer 1

Equity settled (shares/share options)
Cash settled (cash based on share price)

Question 2

What is the double entry for an equity settled share based payment?

Answer 2

Dr Asset/Expense
Cr Equity

Question 3

What method is used to value equity shared based payments to suppliers?

Answer 3

Direct method

Value at fair value of item purchased

Question 4

What method is used to value equity shared based payments to employees?

Answer 4

Indirect method

Value at fair value of equity instrument at the grant date

Question 5

What is the grant date?

Answer 5

the date at which the entity and other party agree to the relationship

Question 6

When do you account for the share based payment if there are no vesting conditions?

Answer 6

in full at the grant date

Question 7

What are vesting conditions?

Answer 7

conditions that the counterparty must meet to be entitled to the share based payment

Question 8

When do you account for the share based payment if there are vesting conditions?

Answer 8

account for the receipt of services over the vesting period

Question 9

What is the vesting period?

Answer 9

period over which the vesting conditions are to be satisfied

Question 10

How is the expense for a share based payment recognised?

Answer 10

at each reporting date should be based on the best estimate of the number of equity instruments expected to vest

Question 11

What are the 2 types of vesting conditions?

Answer 11

Market based and non market based

Question 12

How do you treat market based vesting conditions? (related to an entity’s share price)

Answer 12

Ignore them as they are already factored in to the fair value of the equity instrument at the grant date

Question 13

How do you treat non-market based vesting conditions? (unrelated to an entity’s share price)

Answer 13

Consider when calculating the number of instruments to expected to vest

Question 14

What does IFRS 2 state regarding accounting after the vesting date?

Answer 14

no further adjustments to total equity should be made after the vesting date

Entities may transfer balances within equity

Question 15

How to account for equity settled share based payment if they are exercised?

Answer 15

Dr Cash
Dr Equity
Cr Share Capital
Cr Share Premium

Question 16

How to account for equity settled share based payment if they are NOT exercised?

Answer 16

Total equity remains unchanged
Any amounts in OCE can be transferred to RETAINED EARNINGS
Dr Equity
Cr Retained Earnings

Question 17

What is the double entry for a cash settled share based payment? (supplier - goods/services)

Answer 17

Dr Asset/Expense
Cr Liabilities

Question 18

How is a cash settled share based payment valued?

Answer 18

Until settled, remeasure the fair value of the liability at each reporting date

Question 19

If there is a timing element to a cash settled share based payment, how do you recognise this?

Answer 19

when services are received in exchange for cash settled share based payment, the expense in recognised over the period that the services are rendered (vesting period)

Question 20

What does IFRS2 state with regards to the entity having a choice between cash/equity instruments?

Answer 20

-scheme should be accounted for as cash settled if the obligated to settled in cash
-if no obligation exists to settle in cash, account for as equity settled

Question 21

If an employee has a choice whether to settle in cash/equity, how is the equity accounted for?

Answer 21

equity calculated at fair value of the equity at the grant date less the fair value of the cash at the grant date
Recognise over vesting period

Question 22

If an NON-employee has a choice whether to settle in cash/equity, how is the equity accounted for?

Answer 22

equity calculated at fair value of the goods/services received less the fair value of the cash at the date of the transaction
Recognise over vesting period

Question 23

How is the liability accounted for for both employee and non employees that have a choice between cash/equity settlements?

Answer 23

calc by taking cash settlement option and applying rules for cash settled share based payments.
Recognise over vesting period