Professional Documents
Culture Documents
Ifrs
Ifrs
2
Arguments against recognizing
share-based payments
No cost, therefore, no charge
Entities receive good and services without paying anything, so they use to say that there is no cost so they will not recognize any expense in their
statements. There is no outflow of economic benefit from the entity. Employees are providing their valuable services to the company over the
time period and against them, they will receive shares.
By recognizing share based payments as a expense in the statement of profit and loss, it will decrease the profit and recognizing the shares in the
equity will increase the no. of shares so in this way the EPS will be hit twice.
Companies will stop to give the shares to their employees as bonuses. So it will not be favorable for the employees. If companies stop to give
share options to their employees will affect adverse on the employee benefits.
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SCOPE
The concept of share-based payments is broader than employee share options. IFRS 2 encompasses the issuance of
shares, or rights to shares, in return for services and goods. Examples of items included in the scope of IFRS 2 are
share appreciation rights, employee share purchase plans, employee share ownership plans, share option plans and
plans where the issuance of shares (or rights to shares) may depend on market or non-market related conditions.
IFRS 2 applies to all entities. There is no exemption for private or smaller entities. Furthermore, subsidiaries using
their parent's or fellow subsidiary's equity as consideration for goods or services are within the scope of the Standard.
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Types of transaction
1. Equity-settled share-based payments
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Measurement
The basic principle is that all transactions are measured at fair value.
The grant date is the date at which the entity and another party agree to the arrangement.
The vesting date is the date on which the counterparty (e.g. the employee) becomes entitled to receive the cash or
equity instruments under the arrangement.
https://www.cpdbox.com/ifrs-2-share-based-payment/
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CONCLUSION
Government grants may be significant for an entity and requires appropriate treatment in the books
of accounts and disclosures in financial statements to facilitate comparison with other entities and
with prior periods. Ind AS 20, Accounting for Government Grants and Disclosure of Government
Assistance, provides guidance on this.