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IFRS 2 presentation

Date recorded:

The Autorite des Normes Comptables (ANC) (the French accounting standard setter) presented to the Committee the tentative results of their ongoing project to assist the IASB in reviewing IFRS 2. This project is in response to the numerous requests from constituents, some of which have already led to amendments to the standard or interpretations issued by the Committee.

The objective of the ANC's review of IFRS 2 included helping to clarify the core principles, ensuring their consistency, both within the standard and interactions with other IFRS, and helping to make the standard easier to understand and apply. It was reiterated that this was not a post-implementation review of IFRS 2.

At the completion of their work, the ANC anticipates issuing a research paper detailing the results of their findings throughout the project.

The ANC first identified the key principles related to share-based payment arrangements, these included the following:

  • An entity shall recognise goods or services received in exchange for share-based payments as an asset or expenditure respectively,
  • An asset or an expense shall be recognised even if the share-based payment is made by a shareholder of the entity or another group entity,
  • The asset is recognised when received and an expense is recognised when the asset received is consumed or the service received,
  • Consideration given for the goods or services received is recognised in equity or in debt according to the type of payment,
  • The asset of service received is measured at the fair value of what is received or of what is given up according to the general principles applicable to exchange transactions,
  • Initial measurement is made, at the fair value, at the exchange date, and
  • Subsequent measurement of share-based payment transactions reflects the nature of the items (whether debt or equity) according to the general principles of accounting for exchange transactions.

The ANC has developed two recognition and measurement alternative for share-based payment arrangements.

The first alternative is the "unit of service approach" which aims to represent assets acquired or services received by the entity as part of a share-based payment transaction regardless of whether an identifiable payment has been made. This approach is compatible with the grant date fair value approach within IFRS 2 and would result in recognition over the life of the service

The second alternative is the "payment approach" which aims to represent share-based payments made by the entity regardless of whether there has been an identifiable service received. This approach represents services paid so that until the awards have vested, there would be no equity issued but rather a liability accrual for the services received.

The ANC has not stated a preference for either of the alternative approaches, but they believe that either approach would simplify the current requirements within IFRS 2, in part because of the removal of the anti-abuse provisions currently contained within IFRS 2.

The ANC mentioned that they have completed their work and are working to issue the research paper to document the results of their analysis.

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