IFRS 2 - Accounting for cash-settled share-based payment transactions that include a performance condition

Date recorded:

In April 2013, the Committee received a request to clarify the accounting for cash-settled share-based payment transactions that include a performance condition. The Committee observed IFRS 2 does not specifically address the impact of vesting conditions within the context of cash-settled SBP transactions and the Implementation Guidance in Example 12 of IFRS 2 illustrates measurement of cash-settled SBP transactions that includes a service condition in the same was as it would for equity settled SBP transactions that includes a service condition. The Committee tentatively decided that the measurement of equity-settled awards that include a performance condition should be applied by analogy to account for cash-settled SBP transactions that include a performance condition. The Committee asked the staff to draft a proposal for an annual improvement to IFRS 2 reflecting its conclusions at the September meeting.

Staff presented their draft amendment to IFRS 2 with the conclusions and an assessment of the issue against the Committee’s agenda criteria, where they determined an annual improvement to IFRS 2 is needed. Staff propose this amendment to be exposed together with other narrow scope amendments to IFRS 2. Staff recommended amending paragraph 33 of IFRS 2 and adding paragraphs 33A-33B (presented in Appendix B in their paper) to clarify the effect that vesting and/or non-vesting condition have in measuring the liability. In addition, Staff recommended adding Example 12A (presented in Appendix B in their paper) to the Implementation Guidance of IFRS 2. Staff proposed their amendment to IFRS 2 should be applied to new awards on a prospective basis, first time adopters should take relief from exemptions for SBP transactions as per Appendix D of IFRS 1 and no consequential amendments to be made.

Staff asked the Committee if they agreed with their proposals.

A member said that the approach presented by Staff would increase transparency and decrease diversity in practice. However, the issue is the measurement of the obligation and the answer Staff have given is not correct. There are too many issues to address in one narrow scope amendment. Staff replied that they intend to put all IFRS 2 issues in one package to take to the Board.

Another member said that the draft amendment Staff presented does reflect what the Committee suggested in September. The member also suggested that in the amendment the wording between equity settled and cash settled plans should be consistent.

A member was unsure why the amendments should be applied on a prospective basis as retrospective seemed more correct. He added that companies would usually have the figures ready and therefore retrospective application would not be too difficult to make.

Another member requested Staff to clarify the wording presented in the amendment on market, vesting and non-vesting conditions as the current wording is difficult to read in the amendment.

The Chairman concluded that generally the Committee agreed with Staff but they need to revisit the wording of their proposals.

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