International Financial Reporting Standards_guide.pdf

Chapter 29 Share-Based Payment (IFRS 2) 313
assets) or by issuing equity instruments, the following principles should be applied to the
transaction:
■ the transaction should be accounted for as cash-settled, if and to the extent that the
entity has incurred a liability to settle in cash or other liabilities; or
■ the transaction should be accounted for as equity-settled if and to the extent that no
liability has been incurred.
Share-Based Payment Transactions That Provide the Counterparty with a Choice
of Settlement
29.4.17 For share-based payment transactions in which the terms of the arrangement provide
the counterparty with the choice of settlement, the entity has granted a compound financial
instrument. The instrument has both a debt (the counterparty’s right to demand cash)
and an equity component (the counterparty’s option to receive equity instruments rather
than cash). Each component is accounted for separately, similar to the requirements of IAS 32
(refer to chapter 33).
Share-Based Payment Transactions That Provide the Entity with a Choice of
Settlement
29.4.18 For share-based payment transactions in which the terms of the arrangement provide
the entity with a choice of settlement it is necessary to determine whether the entity has
a present obligation to settle in cash. The entity has a present obligation to settle in cash if:
■ the choice of settlement has no commercial substance (for example when the entity is
prohibited from issuing shares);
■ the entity has a past practice or stated policy of settling in cash; or
■ the entity generally settles in cash whenever the counterparty asks for cash settlement.
Share-Based Payment Transactions among Group Entities
29.4.19 The accounting treatment of share-based payment transactions within a group was
previously addressed by IFRIC 11. The requirements of IFRIC 11 were clarified and incorporated
in IFRS 2 during June 2009. This amendment to IFRS 2 is effective for financial years
beginning on or after January 1, 2010.
29.4.20 When recognizing the share-based payments in its separate financial statements,
the entity receiving the goods or services should measure them as either an equity-settled or
cash-settled share-based payment transaction, by assessing the nature of the awards and its
own rights and obligations.
29.4.21 The entity receiving the goods or services should measure them as an equity-settled
share-based payment transaction when:
■ the awards granted are its own equity instruments (that is, not the equity instruments
of its parent or another entity within the group); or
■ the entity has no obligation to settle the share-based payment transaction (that is, the
parent or another entity within the consolidated group has the obligation to settle).
In all other circumstances, the entity receiving the goods or services should measure them as
a cash-settled share-based payment transaction.
29.4.22 The entity settling a share-based payment transaction when another entity in the
group receives the goods or services should recognize the transaction as an equity-settled sharebased
payment transaction only if it is settled in the entity’s own equity instruments. Otherwise
the transaction should be recognized as a cash-settled share-based payment transaction.