Chapter 40- SMEs- Share-based Payment

Share-Based payment Transactions

A.
Equity-settled share-based payment transaction
An entity acquired goods and services as consideration for equity instruments
Example: Employee share options
B.
Cash Settled share based payment transactions
An entity acquires goods or services by incurring liabilities to the supplier of
goods and services for amounts based on the price of the entitys equity
instruments
Example: Share appreciation rights
C.
Entity acquires goods and services and the terms provide either the
entity or the supplier with a choice of whether the entity settles the transaction
in cash or by issuing equity instruments.
D.
Transactions that may be settled by another group entity or a
shareholder of any group entity on behalf of the entity receiving the goods or
services.
Measurement of equity settled
-Transactions with respect to goods and services received from non employees are
measured @ FV of goods or services received.
> If the FV of the goods or services cannot be estimated reliably, the fair
value of the equity instruments at grant date is usedonly if this is undeterminable,
use of the intrinsic value measurement method is permitted.
- Transactions with employees are measured at FV of Equity instruments at grant
date.
Fair Value of shares
1.
Observable market price is available for the equity instrument such
market price is used.
2.
Observable market price is not available, the entity- specific market
data
maybe
used,
such
as:
a.
A
recent
transaction
in
the
shares
of
the
entity
b. Recent independent valuation of the entity of the principal assets
3.
Observable market price is not available and obtaining a reliable
measurement is impracticable, a valuation method that uses market data
to
the
greatest
extent
practicable
should
be
used.
This valuation method may involve PV or Discounted Cash flow technique in
determining FV.
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.
Conceived as additional compensation on the part of officers and key
employees.

Compensation must be measured @ FV of share options at the date of grant

Recognition
of
Compensation
If share options vest immediately, employees are not required to complete a
specified period of service before unconditionally entitled to the share options.
On grant date compensation is recognized as full expense with corresponding
increase in equity.
a.
If share options do not vest immediately, employees should complete
the specified service period before the compensation be recognized as
expense over the service or the vesting period.
Acceleration of Vesting
Happens when an entity cancels or settles a grant of share options during the
vesting period. The cancellation or settlement is accounted as an an acceleration
vesting.
The entity shall recognize immediately the compensation expense otherwise
would have been recognized for services received over remainder of the vesting
period
Any payment made to the employee on cancellation or settlement of the grant is
accounted as repurchase of equity interest- deducted from equity
If Payment exceeds the FV of share option, the excess is recognized as
EXPENSE.