Requires entities to reflect the effects of these transactions in profit or loss and financial position, including expenses from granting share options to employees.
Share-based payment transaction defined: A transaction where an entity:
a) Receives goods or services from a supplier (including an employee) in a share-based payment arrangement.
b) Incurs an obligation to settle the transaction with the supplier when another group entity receives those goods or services.
Share-based payment transactions with cash alternatives (Section 16.5).
Vesting Period, Service Condition, Performance Condition, Market Condition
Vesting Period: Period during which employees are required to work to receive ordinary shares.
Service Condition: Employees must work for a certain period.
Performance Condition: Employee incentives are tied to company performance (e.g., profit increase).
Market Condition: Not factored into calculations; ESOP (Employee Share Option Plan) options are treated as derivatives and linked to primary instruments.
Need to estimate total expense at grand date and split evenly over the vesting period.
16.1.2 Scope Extended to Certain Group Share-based Payment Transactions
IFRS 2 applies when a share-based payment transaction is settled by another group entity or shareholder on behalf of the entity receiving the goods or services.
It applies when an entity:
a) Receives goods or services, and another group entity has the obligation to settle the share-based payment transaction.
b) Has an obligation to settle the transaction when another entity in the same group receives the goods or services.
IFRS 2 does not apply if the transaction is not for payment of goods or services supplied to the entity.
16.1.3 Out of IFRS 2 Scope
IFRS 2 does not apply to:
a) Transactions with employees in their capacity as holders of equity instruments (e.g., right issues).
b) Transactions where an entity acquires goods as part of net assets in a business combination.
However, IFRS 2 still applies to:
a) Equity instruments granted to employees of the acquiree in their capacity as employees (e.g., for continued service).
b) Cancellation, replacement, or modification of share-based payment arrangements due to a business combination or equity restructuring.
16.1.4 Fair Value Measurement in IFRS 2
IFRS 2 primarily uses fair value for measuring share-based payment transactions.
Fair Value Definition: The amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged in an arm’s length transaction.