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Share-based Payment - Group cash-settled share-based payment transactions

 

Group Cash-settled Share-based Payment Transactions (Proposed amendments to IFRS 2 Share-based Payment and IFRIC 11 IFRS 2—Group and Treasury Share Transactions)

At the IFRIC meeting in May 2008, the staff presented a summary of comments received on the exposure draft (ED). The IFRIC agreed to reconsider the significant points raised by respondents before making its recommendations to the Board. Because IFRS 2 is being amended by this project, the Board decided at its meeting in May 2008 that the amendments should also incorporate into IFRS 2 all the guidance currently found in the interpretations.

At this meeting, the IFRIC redeliberated the scope and measurement proposals in the ED. The staff presented papers considering alternatives to address the main areas of concern expressed by respondents about these proposals.

The ED considered how to include in the scope of IFRS 2 share-based payment transactions involving group entities (including shareholders) in which the settling entity may not be the entity receiving goods and services. The IFRIC agreed with respondents that the ED’s proposals did not completely achieve its objective. Therefore, the IFRIC decided to recommend that the Board amend some defined terms and paragraph 3 of IFRS 2 to make it clear that:

  • the receiving entity has to account for the goods and services received in accordance with IFRS 2; and
  • the settling entity has to account for the settlement in accordance with IFRS 2.

The IFRIC also decided to recommend that the Board should consider amending IFRS 2 to add the general principles developed by the staff rather than continuing to develop specific guidance case by case.

The IFRIC reconsidered the classification and measurement proposed in the ED for the separate financial statements of the entity receiving goods and services when a share-based payment transaction will be settled by another group entity or its shareholder.

In these cases, after considering comments made by respondents, the IFRIC decided to recommend that the classification and measurement of the share-based payment transaction by the receiving entity and settling entity should not necessarily be the same, dependent on the circumstances. When the receiving entity does not have any obligation to settle the share-based payment transaction, it should measure the goods and services received in accordance with the requirements for equity-settled transactions. Thus, only changes in estimates associated with vesting conditions (performance conditions) other than a market condition would be reflected. The receiving entity would recognise an equivalent contribution from its shareholder or parent in equity irrespective of how the expense is calculated by the party with the obligation to settle the shared-based payment transaction. The financial statements of the group and the settling entity will reflect the appropriate IFRS 2 measurement on the basis of the actual settlement by the group settling entity.

The IFRIC directed the staff to report a summary of its discussions to the Board along with the rationales underlying the recommended changes from the proposals in the ED.

Consistently with the conclusions reached by the IFRIC and the Board when finalising IFRIC 11, the IFRIC decided to recommend that the Board not amend IFRS 2 at this time to address how to account for an intragroup reimbursement arrangement for these group share-based payment transactions.

The Board published an Exposure Draft of proposed amendments to IFRS 2 Share-based Payment and IFRIC 11 IFRS 2 – Group and Treasury Share Transactions for public comment in December 2007 and received 44 comment letters in response.

At the May 2008 IFRIC meeting, the staff presented a summary of comments received on the Exposure Draft. Because IFRS 2 is being amended by this project, at its May 2008 meeting the Board decided that the final amendment should also incorporate into IFRS 2 all the guidance currently found in the interpretations.

The IFRIC redeliberated the scope and measurement proposals in the ED at its July 2008 meeting. After considering comments made by respondents, the IFRIC directed the staff to report a summary of its discussions to the Board along with the rationales underlying the recommended changes from the proposals in the ED.

For details of the project, please refer to the IASB project pages .