Share Based Payments Cheat Sheet

Share Options Share Based Appreciation

Applicable Standard PFRS 2
Fair Value Definition The amount for which an asset could be exchanged, a liability settled
or an equity instrument granted could be exchanged, between
knowledgeable, willing parties in an arm`s length transaction
(this definition is different from the FV definition in PFRS 13)
Initial Measurement and Hierarchy Hierarchy
Subsequent Measurement 1. Fair Value 1. Fair Value
2. Similar 2. Similar
3. Pricing Models 3. Pricing Models
4. Intrinsic Value (Market Price – Option 4. Intrinsic Value (Market
Price) Price – Predetermined
Price)

Note:
1. Intrinsic Value Method
is Predominantly Used
because the Value of the
Compensation is difficult
to determine
2. If silent the
predetermined price is
the price at grant date
If Vest Immediately Recognize Everything as Expense
If subject to Vesting Conditions Allocate, and use your prior knowledge for Accounting Changes in
Estimates (Account Prospectively)
When the vesting period has Intrinsic Value Fair Value Method Whether Intrinsic or Fair
been met, and the company Method Value Method
uses Not Applicable,
Differences because the FV of The changes in the
between intrinsic the Share Based appreciation of the rights
value x Compensation is might reduce the accrued
outstanding share determined salaries payable to 0
options shall be @grant date, amount causing reversal
recognized as subsequent of the previous salaries
either expense or changes is ignored recognized
reversal unless there is
depending on the modification and
changes in intrinsic the same is
value beneficial
If Vesting was Accelerated Recognize all remaining salaries to be recognized
Modification Beneficial – Account Separately
Not Beneficial – Ignore

There will be 2 entries here

1. For the original Share Options
2. For the Modifications (provided beneficial)
Cancellation The accumulated share options Close the Accrued
outstanding will be closed to Share Salaries account
Premium
Exercise of Right Share Premium Determination Close the Accrued
if Share Options If Share Cancelled Salaries Account and
Exercised A. Cancel the Share Credit the Cash, in case
Options the payment exceeds the
1. FV Method Outstanding Accrued Salaries
(Accumulated B. Any Excess of Account the balance will
Share Options Cash paid from the be closed to the Salaries
Outstanding + Share Options Expense
(Exercise Price - Outstanding will be
Par Value) x Share treated as
Options Additional Salaries
 Outstanding

2. Intrinsic Value
Method
(Market Value –
Par Value) Share
Options
Outstanding

Share and Cash Alternative

A. If the entity has choice – no special accounting needed because the entity will either treat is
as liability or asset but not both

B. Other party has choice – the liability must be separated from the equity component, the
equity component is the residual amount

1. Separate the equity component and allocate over the vesting period
2. The accrued salaries will be re-measured each year depending on the intrinsic
value (Market Value – Predetermined Rate)

Share Based Payment Transaction

Hierarchy

1. FV of Asset Acquired

2. FV of Equity Instrument

3. PAR of Equity Instrument