not only explains the detailed provisions of IFRS 2 but also deals with its application in many practical situations. Because of the complexity and variety of share-based payment awards in practice, it is not always possible to be definitive as to what is the 'right' answer. However, in this guide Deloitte shares with you our approach to finding solutions that we believe are in accordance with the objective of the Standard. Click for links to other Deloitte IFRS Publications
When IFRS 2 was issued in 2004, the idea of recording an expense for share-based awards at their fair value in the income statement seemed to be revolutionary. Three years later, despite the ongoing arguments about 'increased volatility' in earnings, preparers and users are generally accustomed to the concept that when an entity grants a share-based award to its service-suppliers (employees and others), it should recognise an expense. The bigger challenges today lie with more practical concerns. To name just a few:
- how to determine fair value for awards with more complex terms and conditions?
- when to classify transactions as cash- or equity-settled?
- whether amendments to terms and conditions represent modifications or replacements?
- how to account for transactions with multiple features and several potential outcomes?
- And perhaps the most common issue in practice: how to account for share-based awards in the individual financial statements of group entities in situations when, for example, the parent grants share-based awards to employees of its subsidiaries? IFRIC 11 has partly addressed this issue - but many questions remain.