Share based payments

Question 1

IFRS 2 share based payment definition

Answer 1

A transaction in which an entity receives goods or services as consideration for equity

Question 2

Cash vs equity share based payments

Answer 2

Equity - the entity receives goods as consideration for equity
Cash - the entity receives goods by incurring liability to the supplier for an amount based of of share price

Question 3

Recognition

Answer 3

An entity should recognise when it obtains goods or as service is being received

Equity
Dr expense Cr Equity (normally a new line item ‘share based payment reserves)

Cash
Dr expense Cr liability (the obligation to pay)

Question 4

Measurement options

Answer 4

Direct - FV of goods
Indirect - FV of equity option. Equity settled (FV at grant date and do not update), Cash settled (update the FV at each year end with movement to P&L)

Question 5

Transactions with employees

Answer 5

Value (either equity or cash/liability) = number of employees expected at end of vesting period x option x FV per x proportion of vesting period

Movements year on year go to P&L

Equity-settled keeps FV as grant date always.
Cash-settled update FV to year end every year.

Question 6

Impact of market conditions (share price movements)

Answer 6

Ignore likelihood throughout as already included in FV