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IFRS 2 — Group cash settled share based payment transactions

Date recorded:

The IFRIC discussed whether it should provide guidance on how to account for the following cash-settled share-based schemes in the financial statements of a subsidiary that receives services from its employees.

  • Scheme 1: The employees of the subsidiary will be reimbursed by cash payments that are based on the price of the equity instruments of the subsidiary
  • Scheme 2: The employees of the subsidiary will be reimbursed by cash payments that are based on the price of the equity instruments of the parent of the subsidiary.

Under both schemes, the parent (not the subsidiary) has the obligation to provide the employees of the subsidiary with the cash payments required.

The IFRIC concluded that scheme 1 is in the scope of IFRS 2 Share-based Payment in accordance with paragraph 6 of IFRIC 8 Scope of IFRS 2. With regard to scheme 2 the IFRIC believed that under the existing guidance this scheme would not be in the scope of IFRS 2. The IFRIC stated that the scheme is essentially cash-settled and share-based and that the subsidiary should measure the services received from its employees based on the requirements applicable to cash-settled share-based payment transactions.

Some IFRIC members raised the concern that application of other standards (for instance, IAS 19 Employee Benefits) may result in not recognising expenses in the subsidiary's books; for instance, if the parent does not charge its expenses to the subsidiary. Such an accounting treatment was considered to be misleading.

The IFRIC began an assessment of this potential agenda item against its Agenda Criteria. In doing so, it agreed that this issue would best be addressed by amending the definition of cash-settled share-based payment transactions in IFRS 2.

The IFRIC reached a tentative decision that this matter should be addressed by the IASB and should not be added to the IFRIC agenda. The staff was asked to draft a proposed amendment to IFRS 2 and consequential amendments to IFRIC 8 for discussion at a subsequent meeting.

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