Chronology
Timetable
Discussion at the October 2007 IASB Meeting
At its September 2007 meeting, the IFRIC decided to amend IFRIC 11 IFRS 2–Group and Treasury Share Transactions to clarify that certain share-based payment arrangements are within the scope of IFRS 2 Share-based Payment and to specify how the employee services received by the subsidiary should be measured in its financial statements. In addition, the IFRIC agreed to suggest to the Board (consequential) amendments to IFRS 2 to clarify its scope, particularly paragraph 3 of IFRS 2. (See September 2007 IAS Plus IFRIC Notes).
Subject to editorial comments the Board agreed to the proposed amendments to both IFRIC 11 and IFRS 2 (actual text was not included in the observer notes).
Some Board members noted that it would be better to amend IFRS 2 with consequential amendments to IFRIC 11 rather than the other way round. However, no decision regarding the due process was made at this meeting.
Exposure Draft Issued 13 December 2007
On 13 December 2007, the IASB issued for comment an exposure draft of proposed amendments to IFRS 2 Share-based Payment and IFRIC 11 IFRS 2 – Group and Treasury Share Transactions.
The proposals respond to requests for guidance on how a group entity that receives goods or services from its suppliers (including employees) should account for the following arrangements (referred to by the IASB as group cash-settled share-based payment transactions):
- Arrangement 1 – the entity's suppliers will receive cash payments that are linked to the price of the equity instruments of the entity
- Arrangement 2 – the entity's suppliers will receive cash payments that are linked to the price of the equity instruments of the entity's parent
Under either arrangement, the entity's parent has an obligation to make the required cash payments to the entity's suppliers. The entity itself does not have any obligation to make such payments.
The proposed amendment to IFRS 2 clarifies that IFRS 2 applies to arrangements such as those described above even if the entity that receives goods or services from its suppliers has no obligation to make the required share-based cash payments.
The proposed amendment to IFRIC 11 specifies that the entity should measure the goods or services in accordance with
the requirements for cash-settled share-based payment transactions.
Comment deadline is 17 March 2008. Click for Press Release (PDF 51k).
Discussion at the May 2008 IFRIC Meeting
The IFRIC discussed comments received on the IASB's exposure draft of proposed amendments to IFRS 2 Share-based Payment and IFRIC 11 IFRS 2–Group and Treasury Share Transactions – Group Cash-settled Share-based Payment Arrangements (the ED).
The staff noted that this ED was being discussed with the IFRIC because the IASB's ED was triggered by a reference from the IFRIC to the IASB.
The staff noted that respondents expressed general agreement with the proposals regarding scope and measurement for group arrangements between parent and subsidiary but that severe concerns were raised regarding the application of the proposals to arrangements other than those between parent and subsidiary.
Scope and classification
The main concerns raised by constituents were:
- A contribution in equity from parent should not be recorded for arrangements other than those between parent and subsidiary.
- There are inconsistencies between the scope of IFRS 2 and IFRIC 11 as proposed and, therefore, the scope and terminology should be aligned among these IFRSs.
- The ED extends the scope of IFRS 2 on a case-by-case basis. Instead the definitions of 'equity-settled share-based payments' and 'cash-settled share-based payments' in Appendix A of IFRS 2 should be amended.
Alternatively, a more comprehensive project could be undertaken to amend IFRS 2 and in this context the main principles of IFRIC 11 and IFRIC 8 could be incorporated in IFRS 2.
Classification and measurement
The main concerns raised by constituents were:
- A classification as cash-settled share-based payments in the financial statements of the subsidiary would be inappropriate since the subsidiary has no liability in either of the arrangements described in the ED.
- The ED has not articulated the IFRS principle for the 'push-down accounting' of the parent's liability in the financial statements of the subsidiary.
- Remeasurement: The changes in the fair value of the parent's liability should not be recorded in the subsidiary's profit or loss since these changes would be changes in the parent's liability.
The IFRIC had a very preliminary discussion of some of these issues and made suggestions to the staff, but no decisions were requested or made.
Project plan/ way forward
The IFRIC agreed to participate in assisting the IASB to redeliberate issues in the ED in light of respondents' comments. Specifically, it will address issues related to scope and classification in July 2008 and issues related to measurement at its September 2008 meeting. The IASB will discuss the IFRIC's conclusions at the October 2008 IASB meeting. If no further Board discussion is required, the amendments to IFRS 2 and IFRIC 11 should be issued in December 2008.
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