Share-based payments – IFRS 2 handbook - KPMG
Share-based payments
IFRS 2 handbook
November 2018 ifrs
Contents
Variety increases complexity
1
1 Introduction
2
2 Overview
8
3 Scope
15
4 Classification of share-based payment
transactions
49
5 Classification of conditions
66
6 Equity-settled share-based payment transactions
with employees
81
7 Cash-settled share-based payment transactions
with employees
144
8 Employee transactions ? Choice of settlement 161
9 Modifications and cancellations of employee
share-based payment transactions
177
10 Group share-based payments
208
11 Share-based payment transactions with
non-employees
257
12 Replacement awards in a business combination 268
13 Other application issues in practice
299
14 Transition requirements and unrecognised
share-based payments
317
15 First-time adoption of IFRS
320
Appendices
I Key terms
333
II Valuation aspects of accounting for
share-based payments
340
III Table of concordance between IFRS 2 and this
handbook
374
Detailed contents
378
About this publication
385
Keeping in touch
386
Acknowledgements
388
Variety increases complexity
In October 2018, the International Accounting Standards Board (the Board) published the results of its research project on sources of complexity in applying IFRS 2 Share-based Payment. The Board concluded that no further amendments to IFRS 2 are needed. It felt the main issues that have arisen in practice have been addressed and there are no significant financial reporting problems to address through changing the standard. However, it did acknowledge that a key source of complexity is the variety and complexity of terms and conditions included in share-based payment arrangements, which cannot be solved through amendments to the standard. Therefore, the core principles of the standard are likely to remain unchanged for the coming years. This updated handbook aims to help you apply IFRS 2 in practice and explains the conclusions that we have reached on many interpretative issues. It's based on actual questions that have arisen in practice around the world and includes illustrative examples and journal entries to elaborate or clarify the practical application of IFRS 2. We hope this handbook will help you apply the complex accounting and valuation requirements of this standard to share-based payment transactions.
Kim Heng Anthony Voigt KPMG's global IFRS employee benefits leadership team KPMG International Standards Group
? 2018 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
2 | Share-based payments ? IFRS 2 handbook
1
1.1
IFRS 2.BC29?BC60
Introduction
Background
Historically, the range of specific requirements for the accounting for share-based payments in national GAAPs has been diverse. Some countries have a relatively long tradition of accounting for share-based payments. For example, in the US, APB 25 Accounting for Stock Issued to Employees was issued in 1972, and in 2005 was superseded by ASC Topic 718 Compensation ? Stock Compensation (formerly known as FAS 123(R)). In Canada, HB 3870 Stock-Based Compensation and Other Stock-Based Payments has been in effect for a number of years and contains recognition requirements for share-based payment transactions. In contrast, some countries in the EU still have no requirements for the recognition and measurement of share-based payment transactions in place for entities not required to apply IFRS Standards?.
Share-based payments were first observed in the 1960s, primarily in the US. Consequently, the history of international requirements for the accounting for share-based payments is relatively short compared with other areas of accounting. The development phase of these requirements internationally was accompanied by controversial discussions about whether the recognition of cost for share-based payments that are settled in own equity instruments is justified at all ? i.e. whether such accounting would meet the objectives of financial reporting. Some argued that transactions settled in equity are transactions between the shareholders and the third party, rather than between the entity and the third party. Some people still express concerns about accounting entries that result in a debit to expense and a credit to equity.
Previously, IAS 19 Employee Benefits contained disclosure requirements for equity compensation issued to employees, but there were no recognition or measurement requirements in IFRS for such transactions before the publication of IFRS 2 Share-based Payment. The first milestone in the development of today's standard was in July 2000 when the G4+1, which included the predecessor of the Board, the International Accounting Standards Committee (IASC), issued a discussion paper on the topic. The debates resulted in mandatory requirements for share-based payment transactions ? i.e. IFRS 2 ? being issued in 2004. Modifications to address practice issues continue to the date of this publication.
Document1
Discussion paper Accounting for Share-based Payment Exposure draft ED 2 Share-based Payment IFRS 2 Share-based Payment IFRIC 8 Scope of IFRS 2 2
Issued
Effective for annual periods beginning on or after
July 2000
-
7 November 2002 -
19 February 2004 12 January 2006
1 January 2005 1 May 2006
? 2018 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
1 Introduction 3 1.1 Background
Document1
Issued
Effective for annual periods beginning on or after
IFRIC 11 IFRS 2 ? Group and Treasury Share Transactions2
2 November 2006 1 March 2007
Amendments Vesting Conditions and Cancellations
17 January 2008
1 January 2009
Improvements to IFRSs 2009
Amendments Group Cashsettled Share-based Payment Transactions
16 April 2009 18 June 2009
1 July 2009 1 January 2010
Amendments within the Annual Improvements Project 2010
6 May 2010
1 July 2010
Amendments within the Annual Improvements to IFRSs 2010? 2012 Cycle
12 December 2013 1 July 2014
Amendments Classification and Measurement of Share-based Payment Transactions
20 June 2016
1 January 2018
Notes 1. Besides the pronouncements listed in the table, IFRS 2 has been amended as a
consequence of amendments to other standards, principally the revised version of IFRS 3 Business Combinations issued in 2008, which itself was amended by the Improvements to IFRSs 2010. Other standards, including IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 13 Fair Value Measurement issued in May 2011, and IFRS 9 Financial Instruments issued in July 2014, have also made minor consequential amendments to IFRS 2.
2. IFRIC 8 and IFRIC 11 were withdrawn by the amendments Group Cash-settled Sharebased Payment Transactions issued in June 2009.
IFRIC 8 addressed the issue of whether IFRS 2 applies to share-based payment transactions in which the entity cannot specifically identify some or all of the goods or services received. Places where this issue arose included South Africa, where such payments were being made to historically disadvantaged individuals as a result of Black Economic Empowerment schemes.
IFRIC 11 addressed the issue of whether transactions in which the entity chooses or is required to buy equity instruments from another party should be accounted for as equity-settled or as cash-settled. It further addressed the issue of how to account for a transaction in the separate or individual financial statements of a subsidiary, if the equity instruments of the parent are granted either by the parent or by the subsidiary. For those countries applying IFRS 2 to separate financial statements of parents and subsidiaries, the interpretation also contained an important decision by the IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee (IFRIC)) that recharges between group entities should not be taken into account in determining the classification of a share-based payment transaction.
? 2018 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
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