International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards
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9.3.2.E
Modification, cancellation and settlement .............. 2656
9.4
Modification of award from equity-settled to cash-settled or from
cash-settled to equity-settled .......................................................................... 2656
9.4.1
Equity-settled award modified to cash-settled award ................ 2657
9.4.2
Cash-settled award modified to equity-settled award .............. 2663
10 TRANSACTIONS WITH EQUITY AND CASH ALTERNATIVES ..................... 2665
10.1 Transactions where the counterparty has choice of settlement in
equity or in cash ................................................................................................. 2666
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10.1.1
Transactions in which the fair value is measured directly ........ 2666
10.1.2
Transactions in which the fair value is measured
indirectly – including transactions with employees .................. 2666
10.1.3 Accounting
treatment
.......................................................................
2667
10.1.3.A
During vesting period ................................................... 2667
10.1.3.B Settlement
......................................................................
2669
10.1.4
Transactions with cash-settlement alternative for
employee introduced after grant date ........................................... 2669
10.1.5
‘Backstop’ cash settlement rights ..................................................... 2671
10.1.6
Convertible bonds issued to acquire goods or services .............. 2671
10.2 Transactions where the entity has choice of settlement in equity or
in cash .................................................................................................................. 2672
10.2.1
Transactions treated as cash-settled ............................................. 2672
10.2.1.A
Entity choice has no substance due to
economic or other compulsion for cash
settlement (including unlisted entity awards
with a presumption of cash settlement) ....................2673
10.2.2 Transactions treated as equity-settled ...........................................2673
10.2.3 Change in entity’s settlement policy or intention leading
to change in classification of award after grant date ................... 2675
10.3 Awards requiring cash or equity settlement in specific
circumstances (awards with contingent cash or contingent equity
settlement) ............................................................................................................ 2675
10.3.1
Approach 1 – Treat as cash-settled if contingency is
outside entity’s control ..................................................................... 2676
10.3.2 Approach 2 – Treat as cash-settled if contingency is
outside entity’s control and probable ............................................ 2676
10.3.3 Application of Approach 1 and Approach 2 to awards
requiring cash settlement on a change of control ........................ 2677
10.3.4 Accounting for change in manner of settlement where
award is contingent on future events outside the control
of the entity and the counterparty ................................................. 2678
10.3.4.A
Distinction between re-assessment of
settlement method and modification of terms
of award .......................................................................... 2679
10.3.5 Manner of settlement contingent on future events:
discussions by the IASB and the Interpretations
Committee .......................................................................................... 2679
10.4 Cash settlement alternative where cash sum is not based on share
price or value ....................................................................................................... 2681
11 REPLACEMENT SHARE-BASED PAYMENT AWARDS ISSUED IN A
BUSINESS COMBINATION ........................................................................... 2681
11.1
Background .......................................................................................................... 2681
Share-based
payment
2507
11.2 Replacement awards in business combinations accounted for
under IFRS 3 ....................................................................................................... 2682
11.2.1
Awards that the acquirer is ‘obliged’ to replace .......................... 2682
11.2.1.A
Illustrative examples of awards that the
acquirer is ‘obliged’ to replace ................................... 2684
11.2.2
Acquiree awards that the acquirer is not ‘obliged’ to
replace ................................................................................................. 2685
11.2.3
Accounting for changes in vesting assumptions after the
acquisition date .................................................................................. 2686
11.3 Acquiree award not replaced by acquirer .................................................... 2688
11.4 Financial
statements
of
the acquired entity ................................................. 2688
12 GROUP SHARE SCHEMES............................................................................ 2689
12.1 Typical features of a group share scheme .................................................... 2689
12.2 Accounting treatment of group share schemes – summary ...................... 2691
12.2.1
Background .......................................................................................... 2691
12.2.2 Scope of IFRS 2 for group share schemes ..................................... 2691
12.2.3
Entity receiving goods or services ................................................. 2692
12.2.4 Entity settling the transaction ......................................................... 2693
12.2.5
Transactions settled in equity of the entity or its parent .......... 2693
12.2.5.A
Awards settled in equity of subsidiary ...................... 2693
12.2.5.B
Awards settled in equity of the parent ..................... 2694
12.2.6 Cash-settled transactions not settled by the entity
receiving goods or services.............................................................. 2694
12.2.7 Intragroup
recharges and management charges .......................... 2695
12.2.7.A
Timing of recognition of intercompany
recharges: discussion by the IFRS
Interpretations Committee ......................................... 2697
12.3 Employee benefit trusts (‘EBTs’) and similar arrangements ..................... 2697
12.3.1
Background ......................................................................................... 2697
12.3.2 Accounting
for
EBTs
.........................................................................
2698
; 12.3.3 Illustrative
Examples
– awards satisfied by shares
purchased by, or issued to, an EBT ............................................... 2700
12.3.4 Separate
financial
statements of sponsoring entity .................... 2702
12.3.5 Financial
statements of the EBT .................................................... 2703
12.4 Illustrative example of group share scheme – equity-settled award
satisfied by market purchase of shares .......................................................... 2703
12.4.1
Consolidated financial statements ................................................. 2704
12.4.2 Parent
...................................................................................................
2705
12.4.2.A
Accounting by parent where subsidiary is the
employing entity and EBT is treated as
separate entity ............................................................... 2705
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12.4.2.B
Accounting by parent where subsidiary is the
employing entity and EBT is treated as
extension of the parent ................................................ 2706
12.4.2.C
Parent company as employing entity ........................ 2707
12.4.3
Employing subsidiary ........................................................................ 2708
12.5 Illustrative example of group share scheme – equity-settled award
satisfied by fresh issue of shares ..................................................................... 2708
12.5.1
Consolidated financial statements ................................................. 2709
12.5.2 Parent
....................................................................................................
2710
12.5.2.A
Accounting by parent where subsidiary is the
employing entity and EBT is treated as
separate entity ................................................................ 2710
12.5.2.B
Accounting by parent where subsidiary is the
employing entity and EBT is treated as
extension of parent ......................................................... 2711
12.5.2.C
Parent as employing entity ........................................... 2711
12.5.3
Employing subsidiary ......................................................................... 2713
12.6 Illustrative example – cash-settled transaction not settled by the
entity receiving goods or services ................................................................... 2714
12.6.1
Consolidated financial statements .................................................. 2714
12.6.2 Parent
....................................................................................................
2715
12.6.3 Employing
subsidiary ......................................................................... 2715
12.7 Employee transferring between group entities ............................................ 2716
12.8 Group
reorganisations ....................................................................................... 2717
12.9 Share-based payments to employees of joint ventures or associates .......... 2717
12.9.1
Financial statements of the associate or joint venture ................ 2718
12.9.2 Consolidated financial statements of the investor ....................... 2718
12.9.3 Separate
financial
statements of the investor .............................. 2720
13 DISCLOSURES.............................................................................................. 2720
13.1 Nature and extent of share-based payment arrangements ....................... 2720
13.2 Valuation of share-based payment arrangements ....................................... 2722
13.3 Impact of share-based payment transactions on financial
statements ........................................................................................................... 2724
13.4 Example of IFRS 2 disclosures ........................................................................ 2724
14 TAXES RELATED TO SHARE-BASED PAYMENT TRANSACTIONS ............. 2729
14.1 Income tax deductions for the entity ............................................................ 2729
14.2 Employment
taxes
of the employer ............................................................... 2730
14.2.1
Applicable standard ........................................................................... 2730
14.2.1.A
IAS 37 .............................................................................. 2730
14.2.1.B IFRS 2 .............................................................................. 2730
Share-based
payment
2509
14.2.1.C IAS
19
................................................................................
2731
14.2.2 Recovery of employer’s taxes from employees ........................... 2731
14.2.3
Holding of own shares to ‘hedge’ employment tax
liabilities ................................................................................................ 2733
14.3 Sale or surrender of shares by employee to meet employee’s tax
liability (‘sell to cover’ and ‘net settlement’) .................................................. 2733
14.3.1
Share-based payments with a net settlement feature for
withholding tax obligations (net settlement where IFRS 2
exception applies) ............................................................................... 2735
15 OTHER PRACTICAL ISSUES ........................................................................ 2738
15.1 Matching share awards (including deferred bonuses delivered in
shares) .................................................................................................................. 2738
15.2 Loans to employees to purchase shares (limited recourse and full
recourse loans) ................................................................................................... 2744
15.3 Awards entitled to dividends or dividend equivalents during the
vesting period ...................................................................................................... 2745
15.4 Awards vesting or exercisable on an exit event or change of
control (flotation, trade sale etc.) .................................................................... 2748
15.4.1
Grant date ............................................................................................ 2748
15.4.2
Vesting period .................................................................................... 2748
15.4.3
Is flotation or sale a vesting condition or a non-vesting
condition? ............................................................................................ 2749
15.4.4
Awards requiring achievement of a minimum price on
flotation or sale .................................................................................. 2750
15.4.5 Awards
‘purchased<
br />
for fair value’ .................................................... 2751
15.4.6
‘Drag along’ and ‘tag along’ rights .................................................... 2752
15.5 South African black economic empowerment (‘BEE’) and similar
arrangements ....................................................................................................... 2753
15.5.1
Nature of the trust .............................................................................. 2754
15.5.2
Measurement and timing of the accounting cost ......................... 2755
15.5.3
Classification of awards as equity- or cash-settled ..................... 2756
16 FIRST-TIME ADOPTION AND TRANSITIONAL PROVISIONS ...................... 2757
16.1 First-time adoption provisions ........................................................................ 2757
16.2 Transitional provisions for June 2016 amendments ....................................2758
16.3 Transitional provisions for references to the 2018 Conceptual
Framework ........................................................................................................... 2759
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List of examples
Example 30.1:
Meaning of ‘vesting period’ – award with vesting
conditions only .................................................................................... 2547
Example 30.2:
Meaning of ‘vesting period’ – award with vesting and non-
vesting conditions ............................................................................... 2547
Example 30.3:
Determination of grant date .............................................................2555
Example 30.4:
Awards with multiple service and performance periods ........... 2559
Example 30.5:
Award with non-vesting condition only ....................................... 2568
Example 30.6:
Award with service condition only ................................................ 2569
Example 30.7:
Award with no change in the estimate of number of
awards vesting ..................................................................................... 2572
Example 30.8:
Award with re-estimation of number of awards vesting
due to staff turnover........................................................................... 2572
Example 30.9:
Award vesting in instalments (‘graded’ vesting) ............................ 2573