list Syllabus reference
1 IFRS 2 Share-based payment C10
2 Deferred tax implications C10
Share-based
payment
Introduction
This chapter deals with IFRS 2 on share based payment, a favourite P2 topic.262 9: Share-bas
...
list Syllabus reference
1 IFRS 2 Share-based payment C10
2 Deferred tax implications C10
Share-based
payment
Introduction
This chapter deals with IFRS 2 on share based payment, a favourite P2 topic.262 9: Share-based payment ~ Part B Accounting standards
Study guide
Intellectual level
C10 Share-based payment
(a) Apply and discuss the recognition and measurement criteria for share-based
payment transactions
3
(b) Account for modifications, cancellations and settlements of share-based
payment transactionsTopic
2
Example: Equity-settled share-based payment transaction
On 1 January 20X1, an entity grants 100 share options to each of its 400 employees. Each grant is
conditional upon the employee working for the entity until 31 December 20X3. The fair value of each share
option is $20.
During 20X1 20 employees leave and the entity estimates that 20% of the employees will leave during the
three-year period.
During 20X2 a further 25 employees leave and the entity now estimates that 25% of its employees will
leave during the three-year period.
During 20X3 a further 10 employees leave.
Required
Calculate the remuneration expense that will be recognised in respect of the share-based payment
transaction for each of the three years ended 31 December 20X3.
Solution
IFRS 2 requires the entity to recognize the remuneration expense, based on the fair value of the share
options granted, as the services are received during the three-year vesting period.
In 20X1 and 20X2 the entity estimates the number of options expected to vest (by estimating the number
of employees likely to leave) and bases the amount that it recognizes for the year on this estimate.
In 20X3 it recognizes an amount based on the number of options that actually vest. A total of 55
employees left during the three-year period and therefore 34,500 options ((400 – 55) u 100) vested.
The amount recognised as an expense for each of the three years is calculated as follows:
Cumulative
expense Expense for
at year-end year
$ $
20X1 40,000 u 80% u 20 u 1/3 213,333 213,333
20X2 40,000 u 75% u 20 u 2/3 400,000 186,667
20X3 34,500 u 20 690,000 290,000
Question Share options
During its financial year ended 31 January 20X6, TSQ issued share options to several of its senior
employees. The options vest immediately upon issue.
Which one of the following describes the accounting entry that is required to recognize the options?
A DEBIT the statement of changes in equity CREDIT liabilities
B DEBIT the statement of changes in equity CREDIT equity
C DEBIT profit or loss CREDIT liabilities
D DEBIT profit or loss CREDIT equity
Answer
D Under IFRS 2 a charge must be made to the profit or loss.
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