In December 2007, the Amendments to IFRS 2 were approved by the Board. The Amendments were published on 17 January 2008 and the new requirements come into effect on 1 January 2009, although earlier adoption is permitted.
Reason for the Amendment
IFRS 2 describes vesting conditions as including service conditions and performance conditions but is silent on whether other features of a share-based payment transaction are vesting conditions. IFRS 2 also specifies the accounting treatment when an entity cancels a grant of equity instruments. However, it does not state how cancellations by a party other than the entity should be accounted for.
The Board’s initial objective in this project was to amend IFRS 2 Share-based Payment to clarify the definition of vesting conditions and provide guidance on the accounting treatment of cancellations by parties other than the entity.
In light of the comment letters received the Board has also agreed to include clarification of the definition of vesting conditions and the treatment of all non-vesting conditions. In addition, the Board agreed to include some additional Implementation Guidance to clarify the requirements.
Scope of the Amendment
The amendment deals with two matters. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment.
Is this project part of the Memorandum of Understanding?
No. The MoU sets out a Roadmap of Convergence between IFRSs and US GAAP 2006-2008.
Click here for more information on the MoU.
Project History
Stage 1: Publication of draft Interpretation
This project was initially considered by the International Financial Reporting Interpretations Committee (IFRIC) in its draft Interpretation D11 Changes in Contributions to Employee share Purchase Plans, which was published for comment in December 2004. However, the IFRIC was unable to reach a consensus and the issues were referred to the Board.
Stage 2: Publication of Exposure Draft
The Board agreed that these issues should be clarified as an amendment to the standard and at the April IASB meeting, proposed amendments to IFRS 2 in respect of the treatment of cancellations and the definition of vesting conditions. In particular, the Board agreed that all cancellations, whether by the entity or by other parties, should be treated the same and that vesting conditions are service or performance conditions only.
The Exposure Draft of the proposed amendments to IFRS 2 was published for comment on 2 February 2006.
The comment period for the exposure draft ended on 2 June 2006. Over 50 comment letters were received. These can be viewed on the comment letters page.
Stage 3: Comment analysis and redeliberation
The Board has conducted its redeliberations of the project in light of the responses to the Exposure Draft which were received. The Board agreed to finalise its initial proposals and to include further clarification of the definition of vesting conditions, the treatment of all non-vesting conditions and additional Implementation guidance to clarify the requirements.
Stage 4: Fatal flaw review of first pre-ballot draft
A pre-ballot draft was issued to Board members and the IFRIC for a fatal flaw review in November 2006. As a result of this review, the Board decided, at the January 2007 meeting, to clarify in the Standard that performance conditions must require an explicit or implicit service requirement
Stage 5: Second pre-ballot draft
A second pre-ballot draft of the final amendment was issued to the Board in early March. During its review of this draft, the Board acknowledged that the clarification in the amendment highlights some of the existing divergences between IFRS 2 and SFAS 123(R), but it did not create any new divergences. Therefore, the Board directed the staff to prepare a ballot draft of the Amendment, subject to any further editorial changes.
Stage 6: Ballot draft
A ballot draft was issued on 23 May. The deadline for returning ballot forms is 15 June.
Stage 7: Post Ballot draft deliberations
The Board has asked the staff to clarify how the grant date should be determined under IFRS 2 and also to reconsider whether the Amendment should be finalised in independently of any further work on the determination of the grant date.
At the November 2007 meeting, the Board acknowledged that there was no indication that the amendment will create any new implementation difficulties for IFRS 2 or new divergence from SFAS 123(r). Furthermore, the amendment is already in the final stages of the publication due process. Therefore the Board directed the staff to proceed with the finalisation of the Amendment.
Stage 8: Publication of the Amendment
The Board approved the ballot draft of the Amendment in December 2007. A final amendment was published on 17 January 2008. The new requirements come into effect on 1 January 2009, although earlier adoption is permitted .