Web Summaries IFRS 2: Share Based Payment Introduction IFRS 2 Share-based Payment was issued in February 2004 and

applies to annual periods beginning on or after 1 January 2005. IFRS 2 prescribes the financial reporting by an entity when it undertakes a sharebased payment transaction. It applies to grants of shares, share options or other equity instruments made after 7 November 2002 that had not yet vested at the effective date of the IFRS. IFRS 2 applies retrospectively to liabilities arising from share-based payment transactions existing at the effective date. Summary of IFRS 2 IFRS 2 requires an entity to reflect in its profit and loss and financial position the effects of share-based payment transactions, including expenses associated with share options granted to employees. For equity-settled share-based payment transactions with employees (and others providing similar services), the measurement of the transaction amount is based on the fair value of the equity instruments granted. Fair value is measured at grant date. The valuation focuses on the specific terms and conditions of a grant of shares or share options to employees. In general, vesting conditions are not taken into account in the grant date valuation but the number of equity instruments included in the measurement of the transaction amount is adjusted so that, ultimately, the transaction amount is based on the number of equity instruments that vest. The IFRS sets out requirements if the terms and conditions of an option or share grant are modified or if a grant is cancelled, repurchased or replaced with another grant of equity instruments. IFRS 2 also contains requirements for equity-settled transactions with other parties (ie other than employees and those providing similar services). For cash-settled transactions, the good or services received and the liability incurred are measured at the fair value of the liability. The liability is remeasured to fair value at each reporting date and at the date of settlement, with changes in fair value recognised in profit or loss. IFRS 2 also specifies requirements for transactions in which the terms of the arrangement provide either the entity or the supplier of goods or services with a choice of whether the entity settles the transaction in cash (or other assets) or by issuing equity instruments. IFRS 2 specifies disclosures about share-based payment transactions.