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Share Based Payment Transactions With Cash Alternatives IFRS 2

Share Based Payment Transactions With Cash Alternatives IFRS 2

Share Based Payment Transactions With Cash Alternatives IFRS 2 : For share-based payment transactions in which the terms of the arrangement provide either the entity or the counterparty with the choice of whether the entity settles the transaction in cash (or other assets) or by issuing equity instruments, the entity shall account for that transaction, or the components of that transaction, as a cash-settled share-based payment transaction if, and to the extent that, the entity has incurred a liability to settle in cash or other assets, or as an equity-settled share-based payment transaction if, and to the extent that, no such liability has been incurred.

Share Based Payment Transactions With Cash Alternatives IFRS 2

Share Based Payment Transactions With Cash Alternatives IFRS 2 : If an entity has granted the counterparty the right to choose whether a share-based payment transaction is settled in cash4 or by issuing equity instruments, the entity has granted a compound financial instrument, which includes a debt component (ie the counterparty’s right to demand payment in cash) and an equity component (ie the counterparty’s right to demand settlement in equity instruments rather than in cash). For transactions with parties other than employees, in which the fair value of the goods or services received is measured directly, the entity shall measure the equity component of the compound financial instrument as the difference between the fair value of the goods or services received and the fair value of the debt component, at the date when the goods or services are received.

Share Based Payment Transactions With Cash Alternatives IFRS 2

Share Based Payment Transactions With Cash Alternatives IFRS 2 : For other transactions, including transactions with employees, the entity shall measure the fair value of the compound financial instrument at the measurement date, taking into account the terms and conditions on which the
rights to cash or equity instruments were granted.

The entity shall first measure the fair value of the debt component, and then measure the fair value of the equity component—taking into account that the counterparty must forfeit the right to receive cash in order
to receive the equity instrument. The fair value of the compound financial instrument is the sum of the fair values of the two components. However, share-based payment transactions in which the counterparty has the choice of settlement are often structured so that the fair value of one settlement alternative is the same as the other. For example, the counterparty might have the choice of receiving share options or cash-settled share appreciation rights. In such cases, the fair value of the equity component is zero, and hence the fair value of the compound financial instrument is the same as the fair value of the debt component. Conversely, if the fair values of the settlement alternatives differ, the fair value of the equity component usually will be greater than zero, in which case the fair value of the compound financial instrument will be greater than the fair value of the debt component.

Share Based Payment Transactions With Cash Alternatives IFRS 2

Share Based Payment Transactions With Cash Alternatives IFRS 2 : The entity shall account separately for the goods or services received or acquired in respect of each component of the compound financial instrument. For the debt component, the entity shall recognise the goods or services acquired, and a
liability to pay for those goods or services, as the counterparty supplies goods or renders service, in accordance with the requirements applying to cash-settled share-based payment transactions . For the equity
component (if any), the entity shall recognise the goods or services received, and an increase in equity, as the counterparty supplies goods or renders service, in accordance with the requirements applying to equity-settled share-based payment transactions.

At the date of settlement, the entity shall remeasure the liability to its fair value. If the entity issues equity instruments on settlement rather than paying cash, the liability shall be transferred direct to equity, as the consideration for the equity instruments issued.

Share Based Payment Transactions With Cash Alternatives IFRS 2

Share Based Payment Transactions With Cash Alternatives IFRS 2 :  If the entity pays in cash on settlement rather than issuing equity instruments, that payment shall be applied to settle the liability in full. Any equity component previously recognised shall remain within equity. By electing to receive cash on settlement, the counterparty forfeited the right to receive equity instruments. However, this requirement does not preclude the entity from recognising a transfer within equity, ie a transfer from one component of equity to another.

Share Based Payment Transactions With Cash Alternatives IFRS 2

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