IFRS 2 Share-based Payment - Group Cash-settled Share-based Payment Transactions
In a previous meeting, the Board tentatively confirmed a proposal in the ED to include all forms of group share-based payments in the scope of IFRS 2 Share-based Payment, regardless if they are equity-settled or cash-settled. In addition, to achieve this objective the Board also concurred with the IFRIC's recommendations to amend some of the defined terms in IFRS 2 rather than amend IFRIC 11 IFRS 2-Group and Treasury Share Transactions and to make it clear that:
- (a) the receiving entity accounts for the goods and services received in accordance with IFRS 2; and
- (b) the settling entity accounts for the settlement in accordance with IFRS 2.
At this meeting, the Board considered possible alternatives to measure these group arrangements and the IFRIC's recommended changes from the proposed classification for accounting in the ED.
The Board agreed with the staff's preferred approach but spent much time disagreeing about how they had expressed it in the meeting papers. Ultimately, the Board agreed that the share-based payment expense should be measured in the separate financial statements of the subsidiary as equity-settled when the employees are given the entity's own equity instruments or when the entity has no obligation to settle; in all other circumstances, it is measured as asset-settled. (This has the effect that a share-based payment could be equity-settled in the separate financial statements of a subsidiary but asset-settled in the consolidated financial statements of the parent.)
The Board agreed to this approach, citing the following advantages:
- It always records an IFRS 2 expense on the subsidiary's books. This expense attribution is a definite improvement on the model under IAS 19 for group benefit plans. The IAS 19 model requires the subsidiary to record an expense based only on the amount of cash contribution paid.
- It addresses two concerns raised by respondents to the ED about measuring group cash-settled share-based payment transactions as cash-settled. Respondents did not agree that the subsidiary should:
- recognise a liability when it has no obligation to settle the payment to the employees, and
- remeasure the parent's equity contribution based on changes in the value of the parent's liability.
- It provides a reporting basis consistent with the entity perspective in the subsidiary's separate financial statements.
- It provides a broad and consistent principle that all separate entities can apply to group share-based payment transactions. Though not the main goal of this project, this also preserves the existing guidance in IFRIC 11 for group equity-settled share-based payment transactions.
The staff will prepare a ballot draft (likely to be circulated in February, given other demands on the Board's time), with any sweep issues discussed at the February or March Board meeting. The staff will also prepare an assessment of whether re-exposure is required. One Board member indicated that he was likely to dissent to the amendment.