Share Based Payment Flashcards
What are the two types of Share Based Payments?
Equity Settled and Cashed Settled
What is the double entry for Equity Settled?
Dr Expense Cr Equity ‘Other’
What is the double entry for Cash settled?
Dr Expense Cr Liability
What is equity Settled?
Payment is offered by Company’s shares
What is cash settled?
Payment based on cash price
What is the difference between Cash settled and equity settled?
The FV changes each year until date of settlement for cash settled whereas the FV stays constant for equity settled.
When calculating between one year and another year, where does the difference go to?
P/L
What are two types of vesting conditions?
Market and Non-Market conditions
What type of condition is share price?
Market Condition
What is the general rule for market conditions?
We make no adjustment to equity
When do we estimate the vesting period for market conditions?
At the start
Can we adjust for non-market conditions?
yes, we do adjust annually.
If options do not vest, what happens?
The equity built can be transferred to retained earnings.
When estimating the vesting period, if the period when it vest is actually shorter than the expected vesting period, what do you do?
Accelerate the remainder when it vests
When estimating the vesting period, if the period when it vest is actually longer than the expected vesting period, what do you do?
Just use the original estimate
What applies to IFRS 2?
1) Must be for goods and Services
2) If the share of employees is based on work/services
If the Parent is obliged to replace Subsidiary’s option, do we recognise this as IFRS 2
No we recognise this as IFRS 3 (Business Combinations) since we treat this as FV of considerations
If P is not obliged to replace S’s Subsidiary, do we recognise this as IFRS 2?
Yes, we treat this as wages since we are being nice and we spread this across the vesting period.
What are the conditions that needs to be met if the holder gets rights to the shares and share options?
Market conditions and non market conditions
What does Modification mean and give examples?
Changing the terms during vesting period
E.g. Change the exercise price and change the vesting condition
How do you treat modifications?
1) Continue as normal
2) If the change in exercicse price and vesting condition increase FV ( Spread that increase over the remaining vesting period)
If there are cancellations/Early Settlement during vesting period, what do you do?
1) Recognise full settlement immediately
2) Any Payment to employee ( Dr Equity Cr Cash) up to FV
3) Above FV ( Dr Exp Cr Cash)
