IFRS 2 Share-based Payment

Date recorded:

The Board discussed two sweep issues arising from the Exposure Draft.


Accounting treatment for the liability component

The staff proposed to include in IFRS 2 a new paragraph 28(ba) to clarify the accounting treatment for the liability component and provided the following revised wording:

however, if the grant arrangement included a liability component, the entity shall remeasure the fair value of the liability at the date of cancellation or settlement. and Any payment made to settle the liability component shall be accounted for as an extinguishment reduction in of the liability.

The Board unanimously agreed to the staff proposal.


Definition of vesting conditions

Two issues were discussed in respect of this.

Firstly, one Board member noted that the proposed definition is potentially confusing. The main reason for this is considered to be that the term 'service' could mean the quantity (service condition) and/or quality of services (performance condition) as well as the state of being in employment (in service) and that in paragraph 21 of IFRS 2 the term is used in all three different senses without ambiguity.

Accordingly the staff proposed the following amendment of the definition in Appendix A of IFRS 2 and the following additional paragraph BC 171A of the Basis of Conclusion:


Definition of vesting conditions

The conditions that determine whether the entity receives the services that entitle the counterparty to receive cash, other assets or equity instruments of the entity under a share-based payment arrangement. Therefore, service conditions include service conditions, which require the other party to complete a specified period of service, are vesting conditions. All other vesting conditions are performance conditions which require specified performance targets to be met (such as a specified increase in the entity's profit over a specified period of time). Performance conditions may be market conditions or other conditions.


Paragraph BC 171A

The term services refers to the quantity (service condition) or quality (performance condition) of the service received by the entity.

In principle the Board agreed to the revised definition but noted that the wording needs to be changed. Proposals for re-wording will be given to the staff offline.

Secondly, one constituent noted that further clarification is needed in respect of the treatment of conditions that are not dependent on service, for instance, when the employee receives the share on a successful initial public offering, even if the employee leaves service before the IPO occurs. The Board decided to explain in the Implementation Guidance to IFRS 2 when such a condition is a vesting condition and when it is not.

Correction list for hyphenation

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