Comparison between U.S. GAAP and International ... - Grant Thornton

Comparison between U.S. GAAP and International Financial Reporting Standards 90
IFRS
Cash-settled transactions with nonemployees
Fair value – goods or services acquired shall be
measured at the fair value of the liability. Until the
liability is settled, the fair value shall be remeasured at
the end of each reporting period (IFRS 2.30).
U.S. GAAP
Liability-classified transactions with nonemployees
Similar to IFRS, goods or services acquired shall be
measured at the fair value of the liability. Until the liability
is settled, the fair value shall be remeasured at the end of
each reporting period.
Modifications
If an equity instrument is modified, an entity shall
recognise the remaining original grant date fair value of
the equity instrument unless the original service or
performance conditions are not satisfied plus any
increase in fair value as a result of the modification over
the remaining vesting period.
If an equity-settled instrument is cancelled or settled
and new equity instrument is not granted as a
replacement instrument (IFRS 2.26-28):
• Recognise immediately the remaining grant date
fair value
• Recognise any payment to employees as the
repurchase of an equity interest to the extent of the
fair value of the equity instrument. An amount in
excess of fair value is expensed.
• If the share-based payment arrangement included
liability components
Remeasure the fair value of the liability at the
date of cancellation or settlement
Treat any payment made to settle the liability
component as an extinguishment of the liability
If an equity-settled instrument is cancelled or settled
and a new equity instrument is granted as a
replacement instrument, account for the replacement in
the same way as a modification of the original grant of
equity instrument (IFRS 2.28(c)).
Similar to IFRS, an entity shall determine the fair value of
the modified award on the modification date and compare
that to the fair value of the original award determined
immediately before the modification occurs. If the fair
value of the modified award exceeds the fair value of the
original award immediately before its terms are modified,
the excess is additional compensation cost. Total
compensation cost is generally the sum of the grant-date
fair value of the award plus the additional compensation
cost resulting from the modification. The cost shall be
recognized prospectively over the remaining requisite
service period or, if the modified award is fully vested, the
incremental compensation cost shall be recognized on the
modification date (ASC 718-20-35-3). U.S. GAAP differs
from IFRS in a situation in which a modification causes an
award that was considered improbable of vesting to
become probable of vesting. Under U.S. GAAP,
compensation cost would be based on the updated fair
value measurement at the modification date. Under IFRS,
the original fair value of the award would be used for
measurement purposes. The only change would be in the
number of options expected to vest (ASC 718-20-55-116
through 55-117 and 55-120 through 55-121).
If an award is cancelled for no consideration and it is not
accompanied by a concurrent grant of (or offer to grant) a
replacement award, it shall be accounted for as a
repurchase for no consideration. Any unrecognized
compensation cost shall be recognized on the cancellation
date. Cancellation of an award, accompanied by a
concurrent grant of (or offer to grant) a replacement
award, shall be accounted for as a modification of the
cancelled award (ASC 718-20-35-8 through 35-9).
Settlement accounting applies when an entity repurchases
a share-based award. In general, if an entity settles an
award by repurchasing it for cash or other consideration or
by incurring a liability, any excess of the repurchase price
over the fair value of the repurchased instrument shall be
recognized as additional compensation cost
(ASC 718-20-35-7).
Non-vesting conditions
Non-vesting conditions are all conditions other than
service and performance. The impact of the non-vesting
Unlike IFRS, an award that includes a non-vesting
condition shall be classified as a liability award. The
© 2011 Grant Thornton LLP
All rights reserved
U.S. member firm of Grant Thornton International Ltd