IFRS 2 – Share Based Payment
Objective
Share based payments are the normal feature of the business activities i.e. entity often acquires goods or services and make payment in the form of equity instruments or cash on the basis of equity instruments of the entity. This standard prescribes the guidelines for the entity to deal with the accounting treatment of share based payment in the financial statements of the entity along with related disclosure requirements.
Scope
The requirements of this standard are applicable to the transactions in which entity acquires goods or services and settles the transaction as under:
The entity will recognize the share based equity settled transactions as follows:
DisclosuresThe standard requires the entity to disclose the following:
Objective
Share based payments are the normal feature of the business activities i.e. entity often acquires goods or services and make payment in the form of equity instruments or cash on the basis of equity instruments of the entity. This standard prescribes the guidelines for the entity to deal with the accounting treatment of share based payment in the financial statements of the entity along with related disclosure requirements.
Scope
The requirements of this standard are applicable to the transactions in which entity acquires goods or services and settles the transaction as under:
- Share based equity settled transactions in which entity acquires goods or services and payment is made in the form of equity instruments of the entity (i.e. shares or share options)
- Share based cash settled transactions in which entity acquires goods or services and payment is made in the form of cash which is based on value of certain number of equity instruments
- Share based with alternative settlement transactions in which entity acquires goods or services and payment is made either, in the form of equity instruments or cash which is based on value of certain number of equity instruments of the entity
- Share based payment between the group entities, when one group entity settles the share based payment transaction on behalf of another group entity receiving goods or services
The entity will recognize the share based equity settled transactions as follows:
- In case of acquisition of services an expense will be recognize immediately, if the share based payment is unconditional i.e. it does not require the counter party to satisfy a certain period of services
- In case of acquisition of services an expense will be recognize over the vesting period on straight line basis, if the share based payment is conditional i.e. it requires the counter party to satisfy a certain period of services
- However, the expense relating to the acquisition of services may be included in the cost of another asset if required by a particular standard such as IAS 2 Inventories and IAS 16 Property, Plant and Equipment
- In case of acquisition of goods, an asset will be recognized if the goods received are to be consumed over the period of time such as inventory or it may be recognized as an expense if goods received do not quality for recognition as an asset
- The corresponding credit element will be the increase in the equity of the entity
DisclosuresThe standard requires the entity to disclose the following:
- Details of share based payment transactions that occurred during the year
- Information how the entity has determined the fair value of instrument granted
- Details of valuation techniques used to determine the fair value of instrument granted
- In case of modification, the details of the modification to the share based payment arrangement (if any)