TREATMENT OF SHARE BASED PAYMENTS WHILE PREPARING FINANCIAL STATEMENTS AS PER AS, IND AS AND IFRS (LATEST AND SIMPLIFIED)
The relevant Accounting Standards relating to Share Based Payments are the following:-
a. INDAS 102
b. IFRS 2
c. Guidance Note issued by ICAI
There is no major difference between INDAS 102 and IFRS 2.Therefore, the following descriptions relate to both INDAS 102 and IFRS 2.
Statements of Profit and loss and other Comprehensive income, Statement of changes in Equity and Statement of Financial position are the new names of Financial Statements as per IND AS and IAS.
ii. To guide the entity when it undertakes a share-based payment transaction.
iii. To help the entity to show share-based payment transactions in financial statements.
It applies to all share-based transactions in respect of goods or receives received by the entity.
Goods may be—
d. Intangible Assets
e. Other non-financial assets
The standard does not apply to—
i. Share issued as consideration in a business combination
ii. Certain contract transactions within IndAS-32 or INDAS-109
3. Type of Share Based Transactions.
a. Equity –settled share-based payment transactions
b. Cash –settled share-based payment transactions
c. Share –based payment transactions with cash alternatives
4. Recognition and measurement in the case of Equity –settled share-based payment transactions.
Recognition when the goods or services received.
– Recognize the increase in equity in SOFP.
For goods or services received
– Recognize as expense in SOPL (e.g. employee cost) or– Recognize as asset in SOFP if goods qualify to be recognized so. Other- wise as Expenses
A. Transaction with employees
Measure at the fair value of the equity instruments granted at grant date.
Fair value —- It is the exchangeable value.
Grant Date — The date at which two parties agreed about the contents of the agreement
Vest —The counter Party’s right to receive shares.
B. Transaction with Non- employees
Measure at the fair value of or the goods or services received at the date on which Goods or services received by the entity.
If fair value of or the goods or services received cannot measured, then the fair value of the equity instruments granted .
5. Cash –settled share-based payment transactions
a. Entity receives goods or services
b. Becomes liable to transfer cash or other assets based on share price of entity or another group entity.
– Recognize the liability in SOFP over the vesting period. At last year liability will be zero
– Recognize the expenses in SOPL over the vesting period.
Best example is share appreciation rights .the following procedure related to this type of transaction.
1. Calculate the liability at fair value at grant date as follows.
– No. of employees estimated at year end to been titled to rights on vesting date x no. rights per employee x FV of each right at year end x cumulative proportion of vesting period expired.
2. Treat as expenses in step 1
3. Re measure the fair value of liability at each reporting date
4. Changes in liability measured as per step 2 is treated as Expenses.
— Recognize the expenses in SOPL over the vesting period.
5. At exercising years-
Expenses will be changes in the liability plus amount relating to exercised.
6. Share –based payment transactions with cash alternatives.
a. entity has the right to choose
Accounting treatment is as per Cash –settled share-based payment transactions if there is a present obligation
b. Counter party has the right to choose