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IFRS 2 — Where manner of settlement is contingent on future events

Date recorded:

The IFRIC received a request to clarify the classification and measurement of share-based payment transactions in which the manner of settlement is contingent on future events.

The IFRIC discussed, inconclusively, several possible sources of guidance on contingent settlements in IFRSs. The Chairman asked whether the IFRIC wanted to take the matter onto its agenda, and all IFRIC members declined. However, one member pointed out that in the agenda paper the staff has admitted that IFRS 2 does not contain a clear principle and that paragraphs 35-40 of IFRS 2 had to be 'interpreted' before reaching the conclusion in the staff's paper. It therefore appears to be necessary to interpret the existing principles in IFRS 2 to reach an acceptable answer. Another discussion followed on whether the issue was widespread in practice and several members indicated that they have experienced similar situations.

The Chairman then directed the IFRIC onto the question of how such arrangements should be measured. A couple of members expressed concern about the subsequent measurement of a compound instrument where there is a change in circumstances. One member said it would be more appropriate to treat these conditions as vesting conditions, but pointed out that the question on whether this would meet the definition of a vesting condition has not yet been investigated.

The IFRIC concluded that these matters will be better addressed as part of a comprehensive review of IFRS 2 rather than through a 'quick fix' amendment. The IFRIC will recommend the matter to the Board for inclusion in its IFRS 2 review project.

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