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Share-based Payments
Grant Date
Grant date is the date when
the entity and counterparty
agree to the share-based
payment and the entity
confers on the counterparty
the right to the equity
instruments of the entity, cash
or other asset provided the
vesting conditions are met.
Vesting Period
Vesting period is the period during
which the specified vesting
conditions are satisfied. It can be
a specific time such as when the
employee has fulfilled the terms
stipulated, such as period of
service or performance level.
Vesting Conditions
Vesting conditions are the
conditions that the counterparty
has to fulfill in order to receive the
share-based payment. These
include completing a specified
period of service or achieved a
specified performance level.
3 Types
The standard recognises three types of share-based payment
transactions. They are:
Equity-settled
An entity issues its own equity instruments, or
those of another member of the same group, as
consideration for goods and services received.
Cash-settled
An entity or another member of the
same group pays cash calculated
by reference to the price of equity
instrument as consideration for
goods and services received.
Recognition
Goods or services received in a share-based payment transaction are
recognised when they are received.
At the same time, the entity will recognise an increase in equity if it is an
equity-settled share-based payment. If it is a cash-settled payment
transaction, then a liability is recognised.
Equity-Settled Transactions
The accounting treatment for goods and services received from nonemployees and employees is different.
Non-employees
Goods and services received (other than provided by employees) are
measured at the fair value of the goods and services and equity is
increased correspondingly. In situations where the fair value of the
goods or services cannot be determined reliably, the goods or services
and the increase in the equity are measured at the fair value of the
equity instruments granted.
Vesting Conditions
Answer:
The expenses are recognised and measured irrespective of the market
condition.
3,000 options x RM5 x 1/3 = RM5,000
DR P/L
RM5,000
CR Equity
RM5,000
For each of three years
Market conditions are not taken into consideration in recognising the
expenses. If the fair value of the option changes no adjustment is made
to the amount of expenses recognised. On the other hand if performance
conditions change, then the entity should revise the estimates in
subsequent periods.
Examples 5 and 6 pages 48 49 of text book
Post-vesting Period
After vesting date, the entity is not to make any adjustments to the
goods or services received or corresponding increase in equity. Even if
the options are not exercised, no adjustments are made to total equity.
Modifications that do
not increase the total
fair value of the sharebased payment or is
not beneficial to the
employee (or service
provider) are ignored.
If a modification
reduces the benefit to
the employee, the
entity will continue to
recognise the amount
of the original equity
instruments granted.
Cash-Settled Transactions
Cash settled transactions requires recognition of liabilities:
The goods and services and liability are measured at fair
value.
The liability is remeasured at the fair value at the end of
each year.
Changes in fair value are recognised in the income
statement.
An example of cash-settled share-based transaction is share
appreciation rights given to employees. In this case, the
employees will receive cash payments equal to the increase in the
share price of a specified number of the equity shares.
Examples 13 and 14 pages 57 58 of text book
Equity component
= Fair value of goods and services Fair value of debt component