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10- Share based payment - Coggle Diagram
10- Share based payment
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Shareholders perspective
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Before IFRS 2, no IFRS other than disclosure of 'equity compensation benefit' under IAS 19
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Therefore, preparers are recommended to apply IFRS PS 2
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Types of transaction
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Cash settled
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Number of employees
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Second year; Total number less actual leavers in that year less last year's actual leavers less estimated leavers this year/ less any employees exercising their rights
Second year: if include less number of employees exercising their rights, then CR cash paid on exercised of SARs by employees
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Vesting conditions
Conditions that must be satisfied for the employee to become unconditionally entitled to receive payment under the share based payment
Includes
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Market conditions
Such as vesting dependent on achieving a target share price, are not taken into consideration when calculating the number of equity instruments expected to vest
This is because market conditions are already taken into consideration when estimating the FV of the share based payment
Therefore, an entity recognises share based payment from a counterparty who satisfies all other vesting conditions irrespective of whether a target share price has been achieved
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Modifications, cancellations, settlements
Modifications
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General rule
At the date of modification, the entity must recognise, as a minimum, the services already received measured at grant date FV of the equity instruments granted. that is the normal approach is followed up to the date of modification
Any modifications that increase the total FV of share-based payment must be recognised over the remaining vesting period, that is as a change in accounting estimate. this increase is recognised in addition to the amount based on the grant date FV of the original equity instrument
This is to ensure that only the differential between the original and the modified instrument is measured, rather than any increase in the FV of the original instruments (which would be inconsistent with the principle of measuring equity settled share based payment at grant date FV
Equity settled share based payment, the increase in total FV is measured as;
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Cancellation
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It is treated as an acceleration of vesting, meaning that the full amount that would have been recognised for services received over the remainder of the vesting period is recognised immediately
Settlement
If a settlement is made to the employee on cancellation, it is treated as deduction from repurchase of equity or extinguishment of liability
Equity settled
Any excess of the payment over the FV of equity instruments granted measured at the repurchase date is recognised as an expense
A liability is first remeasured to FV at the date of cancellation/settlement and any payment made is treated as an extinguishment of the liability
Replacement
If equity instrument are granted to the employee as a replacement for the cancelled instruments and specifically identified as a replacement, this is treated as a modification of the original grant
Applying this, the incremental FV is measured as;
FV of replacement instruments, less
Net FV of cancelled instrument (FV immediately before cancellation less any payments to employee on cancellation)
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