ICAEW comment letter on FRED 61 ‘Draft amendments to FRS 102 – Share-based payment transactions with cash alternatives’

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16 Jun, 2015

The Institute of Chartered Accountants in England and Wales (ICAEW) has published its comment letter on the Financial Reporting Council’s (FRC’s) Financial Reporting Exposure Draft (FRED) 61 ‘Draft amendments to FRS 102 – Share-based payment transactions with cash alternatives’.

FRED 61 proposes a narrow scope amendment to clarify and simplify the accounting for share and share option awards where a cash settlement alternative exists.  It seeks to amend paragraph 26.15 of Financial Reporting Standard (FRS) 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland to:

align the requirements in FRS 102 with full IFRS and previous UK and Irish GAAP in cases where the entity can choose to settle in cash or equity;

retain the current requirements of FRS 102 to recognise a liability where the recipient can require settlement in cash; and

generalise the requirements to include those cases where the settlement method is dependent on an external event. 

The ICAEW “broadly” supports the proposals commenting that the proposed changes “will ensure greater consistency between the requirements of FRS 102 and those of FRS 20 and IFRS 2”.  However the ICAEW does express some concerns over the proposal to expand the scope of paragraph 26.15 so that it covers all share-based payment transactions with uncertain settlement methods commenting that this “could make FRS 102 more prescriptive than IFRS 2” and may not achieve the “most appropriate accounting treatment” for such arrangements.

Further comments and a full response to all questions raised in the invitation to comment are contained within the full comment letter which is available on the ICAEW website.

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