SHARE-BASED PAYMENT (IFRS 2)

Question 1

What is the scope of IFRS 2 “Share-based payment”?

Answer 1

Apply IFRS 2 to ALL share based payment transactions including:
1. Equity settled share based transactions
2. Cash settled share based transactions

Question 2

What is a share-based payment?

Answer 2

A share based payment transaction is an agreement between a company and a third party that entitles the third party to receive equity instruments (shares or share options) of the company, or cash (or other assets) for amounts based on the price or value of the equity instruments of the company making the offer.

Question 3

What the entity recognise for an equity-settled share-based payment transaction?

Answer 3

The entity recognize an increase in equity (credit), and asset/expense (debt)

Question 4

What an entity recognize for a cash-settled share-based payment transaction?

Answer 4

The enity recognize a liability (credit), and asset/expense (debt)

Question 5

What is the recognition principle for share-based payment relating to service received?

Answer 5

• If vest immediately, services are assumed to have been received - recognise in full at grant date
• If delayed vesting, services are assumed to be received during period between grant date and vesting date - spread expense

Question 6

How are measured equity-settled share-based payments?

Answer 6

• **Fair Value of goods or services received **
• If FV of goods or services received is not available use Fair Value of equity instruments granted
• if entity cannot estimate reliably FV of the equity instruments granted then measure at intrinsic value

Question 7

How are measured share-based payment for employee services?

Answer 7

Fair Value of equity instruments granted at grant date.

Question 8

When is measured the FV of the goods or services received? (at which time)

Answer 8

At date goods and services are received (and not at grant date)

Question 9

How is measured the FV of equity instruments granted?

Answer 9

Number of equity instruments x Price

• The number of equity instruments is the best estimate of number to be vest revised to actual number vested on vesting date
• The price is the market price or (if market price is not available) a price calculated with a valuation technique

Question 10

What if is not possible to reliably estimate the FV of the equity instruments?

Answer 10

Then measure at intrinsic value

Question 11

How is calculated the intrinsic value? When is it measured?

Answer 11

Intrinsic value =
FV of shares - Price required to pay.

It is measured at date of receipt of goods or services, at each subsequent reporting date and on the date of final settlement

Question 12

What is a vesting condition? (def)

Answer 12

Is the conditions that must be satisfied for the counterparty to become entitled to receive cash, other assets, or equity instruments of the entity, under a share-based payment arrangement.

Vesting conditions determine whether the entity received the services relevant to the share-base payment

Question 13

When is measured the FV of the equity instruments granted? (at which time)

Answer 13

Expense is recognised over the period from grant date to vesting date.

Question 14

What conditions can include vesting conditions?

Answer 14

• Service conditions: requires the other party to complete a specific period of service
• Performance conditions: requires specified performance targets to be met

Question 15

How are recognized goods or services received via share-based payment?

Answer 15

DR Goods and/or services
CR Equity

After vesting date no subsequent adjustement to total equity can be made

Question 16

What is a Cash-Settled Share based payment transaction? (def)

Answer 16

A share based payment transaction in which the entity acquires goods or services by incurring a liability to transfer cash or other assets to the supplier of those goods or services for amounts that are based on the price of the entity’s shares or other equity instruments of the entity.

Question 17

How are measured cash-settled share based payment transactions? How is it calculated?

Answer 17

At Fair Value of liability, calculated by applying option pricing model

Question 18

When to remeasure FV of liability? How is accounted the changes in FV?

Answer 18

Remeasure FV of liability:
‐ at EACH reporting date
‐ At settlement date

Changes in FV goes to profits and losses

Question 19

How to account for a group-settled share-based payment?

Answer 19

An entity that receives goods or services (receiving entity) in an equity-settled or cash-settled share-based payment transaction is required to account for the transaction in its separate or individual financial statement.

• The entity receiving the goods or services recognise them, regardless of which entity settle the transaction, this must be on an equity-settled or a cash-settled basis assessed from the entities own perspective (this might not be the same as the amount recognised by the consolidated group)
• The term “group” has the same definition as per IFRS 10 “Consolidated Financial Statement” that it includes only a parent and its subsidiaries.