The Board started the third day of the Board meeting with a staff paper on issues that have arisen since IFRS 2 Share-based payment was issued in 2004. The purpose of the session was to discuss and decide whether (and if so, how) the issues identified should be addressed. To structure the issues the staff has classified the issues:

• Category A: issues that require revisiting the principles underlying IFRS 2.
• Category B: issues for which some assert the IFRS 2 guidance as incomplete or unclear - this category has the following subcategories:
  • Issues where no further action is required
  • Issues that should be referred to the Annual Improvements Project
  • Issues that should be referred to another Board project
  • Category C: issues arising from an implicit or explicit divergence between IFRS and US GAAP

Category A

The issues addressed in this category, which are based on a petition submitted to the IASB earlier this year (and in similar form to the SEC) encompass the following:

• Accounting for cancellations;
• The measurement date; and
• Accounting for modifications that are not intended to be beneficial to the employee.

The staff recommended that none of the issues should be added to the IASB's agenda as no new arguments were raised that would form a basis for reconsidering the Standard. The Board agreed.

Category B

The staff informed the Board that issues allocated to this category were submitted by constituents as they believe the guidance under IFRS 2 is unclear. To facilitate the discussion, the issues were further subdivided.

No further action required

The following issues were presented to the Board:

• Awards that can unvest and 're-vest'
• Matching share awards
• Investment manager fees
• Distinguishing between service and performance conditions in the non-employee model
• Can service and performance conditions be non-contemporaneous?

The Board briefly discussed some aspects of the issues in this subcategory. It was decided to move the first two issues into the category of issues to be referred to the annual improvements project. The Board agreed for the remaining issues that no further action was required.

Issues to be referred to the Annual Improvements Project

The staff then turned to the second subcategory, issues to be referred to the Annual Improvements Project for resolution by minor amendments:

• Accounting for continuous service in the non-employee model
• Multiple interactive vesting and non-vesting conditions
• Modification - interaction of multiple changes where some are beneficial to the employee and some are not
• Accounting for deferred tax liabilities

The Board agreed with the staff recommendation to refer these issues to the Annual Improvements Project.

Issues that could be referred to another Board project

The staff informed the Board that these issues would be best resolved when referred to other Board projects:

• Retiree eligible awards and other cases where the conditions appear to change from being vesting conditions to being non-vesting conditions
• Accounting for tax reimbursement rights
• Accounting for deferred taxes on 'share-based payments' that are not within the scope of IFRS 2

After a short debate, the Board agreed with the staff recommendation.

Category C

According to the staff issues in this category represent implicit and explicit differences between IFRSs and US GAAP. The staff recommended that the Board revisits a decision on these items once the projects on taxes and debt/equity are complete.

The Board agreed.

It was also agreed that any changes should, if possible, be incorporated in the currently proposed changes to IFRS 2, which would also merge the existing Interpretations into the Standard.