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10- Share based payment - Coggle Diagram

- - - - Share price < Market price
    - - Share price> Market price
- - - - Not last year: Total number less departure estimate in that year
      - Last year : Total number less total actual departure
  - - - Share appreciation rights
      - A right to shares that are redeemable
    - - First year: Total number less actual leavers less estimated leaver
      - 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
  - - - Entity has a choice
        
        Whether to settle the share based payment in cash or by issuing shares, the accounting treatment depends on whether there is a present obligation to settle the transaction in cash
        
        Is there a present obligation to settle in cash?
        
        Yes
        
        Cash settled
        
        No
        
        Equity settled
        
        A present obligation exists
        
        The entity has a stated policy of settling such transactions in cash
        
        Past practices of settling in cash, because this creates an expectation and so a constructive obligation, to settle future such transactions in cash
      - Counterparty has a choice
        
        Debt component
        
        As for cash settled transaction
        
        Equity component
        
        Measured as the residual FV at grant date
        
        FV of share alternatives at grant date less FV of cash alternatives at grant date = Equity component
- - - - Depends on whether it is equity or cash settled
        
        Equity settled
        
        DR Expense CR Equity
        
        IFRS 2 does not specify where in the equity section the credit entry should be presented
        
        Some include in share-based payment reserve, some in the retained earnings
        
        Cash settled
        
        DR Expenses CR Liability
- - - - Use FV of G&S received
    - - By reference to the FV of equity instrument granted
        
        Equity settled
        
        Use FV of equity instrument at grant date
        
        Do not update for subsequent changes in FV
        
        Cash settled
        
        Update the FV at each year end with changes recognised in P/L
      - The FV of equity instrument should be based on market price, taking into account the terms and conditions upon which the equity instrument were granted
      - Is usually used for employee service as it is not normally possible to measure directly the services received
      - Any change in estimates of the expected number of employees being entitled to receive the share based payment are treated as changes in accounting estimate and recognised in the period of the change
- - - - Estimated number of employees entitled to benefits x number of instrument per employee x FV of instrument x proportion of vesting period
- - - - Where the counterparty is required to complete a specified period of service
      - The share based payment is recognised over the required period of service
    - - Such as achieving a specific growth on profit or EPS
      - The amount recognised is based on the best available estimate of the number of equity instrument expected to vest, that is the expectation of whether the profit target is met, revised as necessary at each reporting period end
      - A vesting period may vary in length depending on whether a performance conditions is satisfied, for example where diff. growth targets are set for diff years, and if the first target is met, the instrument vest at the end of the first year, and if not the next target for the following year comes into play
        
        In such circumstances, the share based payment equity figure is accrued over the period based on the most likely outcome of which target will be met, revised at each period end
    - - 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
- - - - This might occur where the share price has fallen
      - The entity may reduce the exercise price of the share options, which increase the FV of those options
    - - 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;
        
        FV of modified equity instrument at date of modification less
        
        FV of original equity instrument at date of modification
    - - The original liability recognised in respect of the cash settled payment should be derecognised and the equity settled share based payment should be recognised at the modification date FV to the extent services have been rendered up to the modification date
      - The difference, if any, between the CA of the liability as at the modification date and the amount recognised in equity at the same date would be recognised in profit or loss immediately
  - - - Any excess of the payment over the FV of equity instruments granted measured at the repurchase date is recognised as an expense
  - - - FV of replacement instruments, less
      - Net FV of cancelled instrument (FV immediately before cancellation less any payments to employee on cancellation)
- - - - CA of share based payment expense, less
      - Tax base of share based payment expense (estimated amount tax authorities will permit as a deduction in future periods, based on year end information)