IASB issues standard on share-based payment

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19 Feb 2004

The IASB has issued IFRS 2 'Share-based Payment'.

Click for Press Release (PDF 36k). The main requirements of IFRS 2 are:

 

Main requirements of IFRS 2
  • Recognition and measurement. All share-based payment transactions must be recognised in the financial statements, using a fair value measurement basis. An expense is recognised when the goods or services received are consumed. The same recognition and measurement standards apply to both public and non-public companies
  • Fair value measurement principle. In principle, transactions in which goods or services are received as consideration for equity instruments of the entity should be measured at the fair value of the goods or services received. Only if the fair value of the goods or services cannot be measured reliably would the fair value of the equity instruments granted be used
  • Measuring employee share options. For transactions with employees and others providing similar services, the entity is required to measure the fair value of the equity instruments granted, because it is typically not possible to estimate reliably the fair value of employee services received
  • When to measure fair value - options. For transactions measured at the fair value of the equity instruments granted (such as transactions with employees), fair value should be estimated at grant date
  • When to measure fair value - goods and services. For transactions measured at the fair value of the goods or services received, fair value should be estimated at the date of receipt of those goods or services
  • Measurement guidance. For goods or services measured by reference to the fair value of the equity instruments granted, IFRS 2 specifies that, in general, vesting conditions are not taken into account when estimating the fair value of the shares or options at the relevant measurement date (as specified above). Instead, vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised for goods or services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest
  • More measurement guidance. IFRS 2 requires the fair value of equity instruments granted to be based on market prices, if available, and to take into account the terms and conditions upon which those equity instruments were granted. In the absence of market prices, fair value is estimated using a valuation technique to estimate what the price of those equity instruments would have been on the measurement date in an arm's length transaction between knowledgeable, willing parties. The standard does not specify which particular model should be used
  • Disclosure. Disclosures include:
    • the nature and extent of share-based payment arrangements that existed during the period
    • how the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period was determined
    • the effect of share-based payment transactions on the entity's profit or loss for the period and on its financial position.

 

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