Share-based Payment

Date recorded:


The Board redebated the ED 2 approach to classifying arrangements by which an entity has a stated policy or past practice of settling a share-based payment obligation in cash. At the September meeting the Board had agreed to make certain changes including removal of the past practice and stated policy allowances. However, the Board has now agreed to revert to the ED 2 approach (vote of 12-2).

The Board discussed various types of modifications of equity-settled arrangements and agreed the following:

  • A modification that results in a decrement in fair value should not be recognised, and any increase should be recognised over the remainder of the vesting period.
  • A decrease in the number of equity instruments granted is a partial cancellation of the grant, and any unrecognised expense related to the change should be recognised immediately. The increase in fair value resulting from an increase in the number of equity instruments should be spread over the remainder of the vesting period.
  • A change in service conditions that changes the length of the vesting period but does not decrease the probability of vesting should continue as if the modification had not occurred. Where the probability of vesting is increased the modification is accounted for via the truing up method under the modified grant date method.
  • A change in performance conditions would be accounted for in the same manner as a change in the vesting period.
  • A change in the classification of the grant from equity to liability should continue to be expensed based on the grant date values but the change in fair value of the liability between modification date and settlement date should be recognised.

The staff proposed adding explanatory guidance to clarify the purpose of the business combination scope exclusion as follows:

  • Equity instruments issued in a business combination in exchange for control of the acquiree are not within the scope of share-based payments.
  • Equity instruments granted to employees of the acquiree in their capacity as employees are within the scope of share-based payments.
  • The cancellation, replacement or other modifications to share-based payments because of a business combination or other equity restructuring should be accounted for in accordance with the requirements of share-based payments.

The Board agreed with these clarifications.

Correction list for hyphenation

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