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SHARED-BASED PAYMENT PFRS 2 - Coggle Diagram
SHARED-BASED PAYMENT
PFRS 2
Shared-based payment
a transaction in which the entity acquires goods or services and pays for them by issuing its own equity instruments or cash based on the value of its own equity instruments.
Types of Shared Based Payment
Equity-settled share-based payment transaction
Cash-settled share-based payment transaction
Choice between equity settled and cash-settled
Measurement of Equity-settled shared-based payment transactions
The equity-settled share-based payment transaction
Non-Employees
Order of priority in measurement:
Fair Value of goods or services
received
Fair Value of equity instruments
granted
Employees and Other providing
similar services
Order of priority in measurement:
Fair value of equity instruments
granted
Intrinsic value
PFRS 2 application
PFRS 2 applies to all entities, except the following:
a. Transactions with owners
b. Business combinations.
c. Issuance of shares as settlement of forward contracts,
futures, and other derivative instruments.
Shared-Based Compensation
A share-based compensation plan is a compensation arrangement established by the entity whereby the entity's employees shall
receive equity shares
in exchange for their services, or the entity incurs liabilities to the employees in amounts based on the price of its
shares.
It can be
Equity settled, Cash Settled
or a
choice between Equity or Cash settled.
Share options
Share options are granted to officers and key employees to enable them to acquire shares of the entity during a specified period upon fulfillment of certain conditions at a specified price.
These options are conceived as additional
compensation
on the part of senior officers and other key employees.
Acceleration of vesting
PFRS 2, paragraph 28, provides that if an entity cancels or settles a grant of share options during the vesting period, the entity shall account for the cancelation or settlement as an acceleration of vesting.
a. The entity shall
recognize immediately
the compensation expense that otherwise would have been recognized for services received over the remainder of the vesting period.
b. Any
payment
made to the employee on the cancelation or settlement of the grant shall be accounted for as the repurchase of equity interest, meaning a deduction from equity.
Measurement of Compensation
Two methods, namely:
a.
Fair value method
- the compensation is equal to the fair value of the share options on the date of grant.
b.
Intrinsic value method
- the compensation is equal to the intrinsic value of the share options.
Intrinsic value = market value of the share - option price.
Note: The intrinsic value method can be used only
if the fair value of the share option cannot be estimated reliably.
Recognition of Compensation
a. If the share options
vest immediately
- the entity shall recognize the compensation as expense in full
immediately on
Grant date.
b. If the share options
do not vest
until the employee completes a specified service period, the compensation is recognized as expense over the service period or vesting period.
Share appreciation right
A share appreciation right entitles an employee
to receive cash
, which is equal to the excess of the market value of the entity's share over a predetermined price for a stated number of shares
on settlement or exercise date.
a share appreciation right creates a liability
Measurement of compensation
The compensation is based on the
fair value of the liability at the reporting date and shall be remeasured at every year-end until it is finally settled.
Any changes in fair value are
included in profit or loss.
The
fair value of the liability
is equal to the
excess of the market value of a share over a predetermined price for a given number of shares over a definite vesting period.
Recognition of compensation
The compensation is recognized immediately if the share appreciation right
vests immediately.
If the share appreciation right
does not vest
until the employee completes a definite vesting period, the compensation is
recognized over the vesting period.