IASB clarifies the classification and measurement of share-based payment transactions
20 Jun 2016
The International Accounting Standards Board (IASB) has published final amendments to IFRS 2 'Share-based Payment' that clarify the classification and measurement of share-based payment transactions. The amendments address several requests that the IASB and the IFRS Interpretations Committee received and that the IASB decided to deal with in one combined narrow-scope project.
Background
The IASB and the IFRS Interpretations Committee received a number of requests related to IFRS 2 Share-based Payment. Respondents asked for clarification on:
- the accounting for cash-settled share-based payment transactions that include a performance condition;
- the classification of share-based payment transactions with net settlement features; and
- the accounting for modifications of share-based payment transactions from cash-settled to equity-settled.
After debating the issues in earlier meetings, the IASB decided in April 2014 to address them together in one narrow-scope project, which has now been completed.
Changes
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2) contains the following clarifications and amendments:
Accounting for cash-settled share-based payment transactions that include a performance condition
Until now, IFRS 2 contained no guidance on how vesting conditions affect the fair value of liabilities for cash-settled share-based payments. IASB has now added guidance that introduces accounting requirements for cash-settled share-based payments that follows the same approach as used for equity-settled share-based payments.
Classification of share-based payment transactions with net settlement features
IASB has introduced an exception into IFRS 2 so that a share-based payment where the entity settles the share-based payment arrangement net is classified as equity-settled in its entirety provided the share-based payment would have been classified as equity-settled had it not included the net settlement feature.
Accounting for modifications of share-based payment transactions from cash-settled to equity-settled
Until now, IFRS 2 did not specifically address situations where a cash-settled share-based payment changes to an equity-settled share-based payment because of modifications of the terms and conditions. The IASB has intoduced the following clarifications:
- On such modifications, the original liability recognised in respect of the cash-settled share-based payment is derecognised and the equity-settled share-based payment is recognised at the modification date fair value to the extent services have been rendered up to the modification date.
- Any difference between the carrying amount of the liability as at the modification date and the amount recognised in equity at the same date would be recognised in profit and loss immediately.
Effective date and transition requirements
The amendments are effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted. The amendments are to be applied prospectively. However, retrospective application if allowed if this is possible without the use of hindsight. If an entitity applies the amendments retrospectively, it imust do so for all of the amendments described above.
Additional information
Please click for:
- IASB press release (link to IASB website)
- Access to the amendments on the eIFRS website (subscription required)
- IFRS in Focus newsletter explaining the amendments
- Our IAS Plus project page on IFRS 2 — Clarifications of classification and measurement of share based payment transactions
