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IASB proposes amendments to IFRS 2 to clarify the classification and measurement of share-based payment transactions

  • IASB document (blue) Image

25 Nov 2014

The International Accounting Standards Board (IASB) has published an Exposure Draft (ED) of proposed amendments to IFRS 2 'Share-based Payment' that would clarify the classification and measurement of share-based payment transactions. The ED addresses several requests the IASB and the IFRS Interpretations Committee received and the IASB decided to deal with in one combined narrow-scope project. Comments are requested by 25 March 2015.

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.

Suggested changes

ED/2014/5 Classification and measurement of share-based payment transactions proposes the following clarifications and amendments regarding the issues:

Accounting for cash-settled share-based payment transactions that include a performance condition

IFRS 2 currently contains no guidance on how vesting conditions affect the fair value of liabilities for cash-settled share-based payments. The IASB proposes to clarify that the accounting in the case of cash-settled share-based payments should follow the same approach as used for equity-settled share-based payments.

Classification of share-based payment transactions with net settlement features

The IASB proposes to include an exception into IFRS 2 so that a share-based payment where the entity settles the share-based payment arrangement net whould be 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

IFRS 2 currently does 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 proposes the following amendments:

  • 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 ED does not contain a proposed effective date but states that earlier application would be permitted. The amendments would be applied prospectively. However, retrospective application would also be permitted if an entity has all necessary information and if the information is available without the use of hindsight.

Additional information

ED/2014/5 is open for comment until 25 March 2015. Please click for:

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