IFRS 2 Share-based Payment
IFRS 2 Share-based Payment specifies the financial reporting by an entity when it undertakes a share-based payment
transaction. A share-based payment is a transaction in which the entity receives goods or services either as consideration
for its equity instruments or by incurring liabilities for amounts based on the price of the entity's shares or other equity
instruments of the entity. The accounting requirements for the share-based payment depend on how the transaction will be
settled, that is, by the issuance of (a) equity, (b) cash, or (c) equity or cash.
All share-based payment transactions are recognised in the financial statements, using a fair value measurement basis. An
expense is recognised when the goods or services received are consumed (including transactions for which the entity
cannot specifically identify some or all of the goods or services received). When the goods or services received or acquired
in a share-based payment transaction do not qualify for recognition as assets, they shall be recognised as expenses.
Transactions in which goods or services are received are measured at the fair value of the goods or services received.
However, if the fair value of the goods or services cannot be measured reliably, the fair value of the equity instruments is
used. Transactions with employees and others providing similar services are measured at the fair value of the equity
instruments granted, because it is typically not possible to estimate reliably the fair value of employee services received.
The fair value of the equity instruments granted (such as transactions with employees) is estimated at grant date, being
when the entity and the counterparty have a shared understanding of the terms and conditions of the arrangement. The
fair value of the goods or services received is estimated at the date of receipt of those goods or services.
Equity-settled share-based payment transactions are recorded by recognising an increase in equity and the corresponding
goods or services received at the measurement date.
A cash-settled share-based payment transaction is 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 (or value) of equity instruments (including shares or share options) of the entity or another group
entity.
IFRS 2 Share-based Payment
IFRS 2 uses the notion of vesting conditions for service conditions and performance conditions only. If a condition does not
meet the definition of these two types of conditions but nevertheless needs to be satisfied for the counterparty to become
entitled to the equity instruments granted, this condition is called a nonvesting condition.
A service condition requires the counterparty to complete a specified period of service to the entity while performance
conditions require the completion of a specified period of service, and specified performance targets to be met, that are
defined by reference to the entity’s own operations or activities (non-market conditions) or the price of the entity’s equity
instruments (market conditions). The period for achieving the performance target must not extend beyond the end of the
service period.
When determining the grant date fair value of the equity instruments granted, the vesting conditions (other than market
conditions) are not taken into account. However, they are taken into account subsequently by adjusting the number of
equity instruments included in the measurement of the transaction. Market-based vesting conditions and non-vesting
conditions are taken into account when estimating the fair value of the shares or options at the relevant measurement
date, with no subsequent adjustments made in respect of such conditions.
References
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Babatunde Jamiu Yusuff
babatundeyusuff@[Link]
