Section 7300: Share-based Payments
International Financial Reporting Standard 2
Share-based Payment
1. First Version of IFRS 2
"Share-based Payment" issued in February 2004
2. Amendment
January 2008, Vesting Conditions and Cancellations
[U.S. GAAP Codification Topic]
718 Compensation - stock compensation
718-10 Overall
718-20 Awards classified as equity
718-30 Awards classified as liabilities
718-40 Employee stock ownership plans
718-50 Employee share purchase plans
505-50 Equity-based payments to non-employees
[U.S. GAAP before the Codification]
APB 25, October 1972, Accounting for Stock Issued to Employees, Superseded by SFAS 123(R) in 2004
SFAS 123, October 1995, Accounting for Stock-Based Compensation
SFAS 123(R), December 2004, Share-based Payment
AICPA SOP 93-6, Employers' Accounting for Employee Stock Ownership Plans
3. Share-based Payment Transaction
(1) Equity-settled share-based payment
--> The entity receives goods or services,
in exchange of the entity's own equity instruments
(2) Cash-settled share-based payment
--> The entity receives goods or services,
in exchange of cash or other assets
--> The amounts are based on the price of the entity's equity instruments
4. Recognition
Goods or services received are recognised
--> when the entity obtains the goods or services
Increase in equity: for equity-settled share-based payment
Increase in a liability: for cash-settled share-based payment
5. Equity-settled Share-based Payment
Goods or services received are measured
--> at the fair value of goods or services received
If the fair value of goods or services cannot be estimated reliably
--> goods or services are measured at the fair value of the equity instruments granted
6. Cash-settled Share-based Payment
Goods or services received are measured
--> at the fair value of the liability incurred
The fair value of the liability is measured
--> at the end of each reporting period and at the settlement date
Change in fair value is recognised in profit or loss
7. Share-based Payment with a Choice of Settlement
Accounted for (1) and (2):
(1) cash-settled share-based payment
--> to the extent that the entity has incurred a liability
(2) equity-settled share-based payment
--> to the extent that no liability has been incurred
Measurement of goods or services
in equity-settled share-based payments to employees
[IFRS 2.11] Measure at (1)
(1) fair value of the equity instruments granted.
[ASC 718-10-30-2] Measure at (1)
(1) fair value of equity instruments issued.
Measurement of goods or services
in equity-settled share-based payments to non-employees
[IFRS 2.10] Measure at (1)
(1) fair value of the goods or service received.
If (1) cannot be estimated reliably, measure at (2)
(2) fair value of the equity instruments granted.
Equity-based payments to non-employees
[ASC 505-50-30-2] Measure at (1) or (2), whichever is more reliable:
(1) fair value of consideration received.
(2) fair value of equity instruments issued.
Fair value of equity instruments granted
[IFRS 2.16] Measure based on (1) if available
(1) market prices
If (1) is not available, use (2) to estimate fair value
(2) a valuation technique
[IFRS 2] No exception for nonpublic entities.
[ASC 718-10-30-6] Fair value is estimated based on share price, expected volatility, and other factors.
[ASC 718-10-30-20]
If (1) cannot be estimated, nonpublic entities can use (2):
(1) expected volatility of its share price
(2) historical volatility of industry sector index --> calculated value
Nonpublic entities: Cash-settled share-based payment
[IFRS 2.30] Measure the goods and services received at (1)
(1) fair value of liability
[IFRS 2] No exception for nonpublic entities.
[ASC 718-30-30-2] In measuring liabilities from share-based payment arrangements, nonpublic entities have a policy decision of (1) or (2):
(1) measure at fair value
(2) measure at intrinsic value
Employee share purchase plan (ESPP)
[IFRS 2] No exception for employee share purchase plans.
[ASC 718-50-25-1] Employee share purchase plans are noncompensatory if certain conditions are met.
Graded vesting
[IFRS 2.IG11] Each installment is treated as a separate grant.
[ASC 718-10-35-8] Award with a graded vesting schedule of service conditions
A choice of (1) or (2):
(1) Treat each vesting portion as a separate award and apply straight-line basis.
(2) Treat the entire portion as one award and apply straight-line basis.
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