At the July 2007 meeting the IFRIC decided not to add this issue to its agenda but asked the staff to draft a tentative agenda decision as well as potential amendments to IFRS 2 Share-based Payment (particularly paragraph 3) and consequential amendments to IFRIC 11 IFRS 2: Group and Treasury Share Transactions (see July IFRIC meeting notes).

The alternative approach

The staff brought to attention of the IFRIC an alternative approach. That is to add this issue to the agenda and to amend IFRIC 11 to clarify that both arrangements in question are within the scope of IFRS 2 and to specify how the employee services received by the subsidiary should be measured in its financial statements. The staff noted that this would be a more efficient approach as the amended Interpretation is expected to be effective significantly earlier than the amended IFRS 2.

The IFRIC reached a consensus that the proposed amendments to IFRS 11 would be within the boundaries of an interpretation and decided to add this project to the agenda. In addition the IFRIC agreed to suggest amendments to IFRS 2 to the Board for inclusion in the annual improvement process.

Subject to editorial comments the IFRIC agreed to the proposed amendments (omitted from observer notes) and asked the staff to bring back the revised wording for approval at a future meeting.

New issue

The IFRIC was also asked whether the following arrangement should be addressed in the proposed amendments to IFRIC 11:

• A subsidiary grants rights to its equity instruments to its employees, and
• The employees of the subsidiary are entitled to put the equity instruments of the subsidiary to the parent for cash at an amount that is based on the price of the equity instruments of the subsidiary.

There seemed to be a consensus that such an arrangement should be treated as equity-settled in the financial statements of the subsidiary and therefore would be outside the scope of the proposed amendments to IFRIC 11. The IFRIC asked the staff to make clear in the revised wording that this type of arrangement is not addressed.