Share base payments Flashcards
What are the 2 types of share based payment?
Equity settled (shares/share options)
Cash settled (cash based on share price)
What is the double entry for an equity settled share based payment?
Dr Asset/Expense
Cr Equity
What method is used to value equity shared based payments to suppliers?
Direct method
Value at fair value of item purchased
What method is used to value equity shared based payments to employees?
Indirect method
Value at fair value of equity instrument at the grant date
What is the grant date?
the date at which the entity and other party agree to the relationship
When do you account for the share based payment if there are no vesting conditions?
in full at the grant date
What are vesting conditions?
conditions that the counterparty must meet to be entitled to the share based payment
When do you account for the share based payment if there are vesting conditions?
account for the receipt of services over the vesting period
What is the vesting period?
period over which the vesting conditions are to be satisfied
How is the expense for a share based payment recognised?
at each reporting date should be based on the best estimate of the number of equity instruments expected to vest
What are the 2 types of vesting conditions?
Market based and non market based
How do you treat market based vesting conditions? (related to an entity’s share price)
Ignore them as they are already factored in to the fair value of the equity instrument at the grant date
How do you treat non-market based vesting conditions? (unrelated to an entity’s share price)
Consider when calculating the number of instruments to expected to vest
What does IFRS 2 state regarding accounting after the vesting date?
no further adjustments to total equity should be made after the vesting date
Entities may transfer balances within equity
How to account for equity settled share based payment if they are exercised?
Dr Cash
Dr Equity
Cr Share Capital
Cr Share Premium
How to account for equity settled share based payment if they are NOT exercised?
Total equity remains unchanged
Any amounts in OCE can be transferred to RETAINED EARNINGS
Dr Equity
Cr Retained Earnings
What is the double entry for a cash settled share based payment? (supplier - goods/services)
Dr Asset/Expense
Cr Liabilities
How is a cash settled share based payment valued?
Until settled, remeasure the fair value of the liability at each reporting date
If there is a timing element to a cash settled share based payment, how do you recognise this?
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)
What does IFRS2 state with regards to the entity having a choice between cash/equity instruments?
-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
If an employee has a choice whether to settle in cash/equity, how is the equity accounted for?
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
If an NON-employee has a choice whether to settle in cash/equity, how is the equity accounted for?
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
How is the liability accounted for for both employee and non employees that have a choice between cash/equity settlements?
calc by taking cash settlement option and applying rules for cash settled share based payments.
Recognise over vesting period
