Share based payments Flashcards
What are share based payments?
occurs when an entity buys goods or services from other parties (such as employees or suppliers), and settles the amounts payable by issuing shares or share options to them.
What are the two main types of share based payment transactions?
equity-settled share-based : the entity receives goods or services in exchange for equity instruments of the entity (e.g. shares or share options)
cash-settled share-based : the entity acquires goods or services in exchange for amounts of cash measured by reference to the entity’s share price.
What is the double entry for share based option?
Share based Option DR Asset/Expense CR Equity (Special reserve)
What is the vesting date?
date employee becomes entitled to cash/option
On 1.1.x1 XYZ Ltd awards 1,000 share options to an employee, on condition he still works for the company in 2 years time.
What is the grant, vesting date and vesting period
The Grant date is? 1.1.x1
The Vesting Date is? 31.12.x2
The Vesting Period is? 1.1.x1 until 31.12.x2
What are the accounting processes if equity-settled share based payments?
recognise asset/expense for goods/service received and equity at FV.
FV = no. of equity instruments issued and expected to vest X fair value of instrument at grant date, spread over the vesting period.
Each year revise the estimate of the number of equity instruments expected to vest
On vesting date, the estimate should equal the number of equity instruments that actually vest
What is the double entry for equity-settled share based payments?
Dr Asset/ SPL expense
Cr Equity (Special reserve)
Watch exams Q’s for irrelevant share prices at each y/e
What are some examples of cash-settled share-based payment transactions?
share appreciation rights (SARs), where employees become entitled to a future cash payment based on the increase in the entity’s share price from a specified level over a specified period of time
Bonus payments based on share price.
What is the accounting treatment for cash-settled share-based payment transactions?
Recognise amount of goods or services acquired and the liability incurred at the fair value of the liability.
re-measure the fair value of the liability at each reporting date and at the date of settlement.
Changes in FV recognised in SPL.
What is the double entry for cash-settled share-based payment transactions during and at the end of the vesting period?
During vesting period
DR SPL exp CR Provision/liability
At the end of the vesting period
DR Provision CR Cash
