IASB proposes amendments on share-based payment

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02 Feb 2006

The International Accounting Standards Board has issued an Exposure Draft that proposes to amend two aspects of IFRS 2 'Share-based Payment' – what are 'vesting conditions' and what is a 'cancellation'.

Vesting conditions are the conditions that an individual or an organisation must satisfy to receive an entity's shares under a share-based payment arrangement.

IFRS 2 currently states that vesting conditions include service conditions and performance conditions. It is silent on whether other features of a share-based payment are vesting conditions.

The ED proposes that vesting conditions should be restricted to service conditions and performance conditions. Under IFRS 2, features of a share-based payment that are not vesting conditions must be included in the grant date fair value of the share-based payment (the fair value also includes market-related vesting conditions).

Under IFRS 2, a failure to meet a condition, other than a vesting condition, is a cancellation. IFRS 2 specifies the accounting treatment of cancellations by the entity but does not give guidance on the treatment of cancellations by parties other than the entity. This amendment proposes that cancellations by parties other than the entity should be accounted for in the same way as cancellations by the entity.

The proposed amendments would apply for annual periods beginning on or after 1 January 2007, with earlier application encouraged. Click for IASB Press Release (PDF 52k). Comment deadline is 2 June 2006.


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