time during the period, including the general terms and conditions of each
arrangement, such as vesting requirements, the maximum term of options granted,
and the method of settlement (e.g. whether in cash or equity). An entity with
substantially similar types of share-based payment arrangements may aggregate
this information, unless separate disclosure of each arrangement is necessary to
satisfy the general principle above;
(b) the number and weighted average exercise prices of share options for each of the
following groups of options:
(i) outstanding at the beginning of the period;
(ii) granted during the period;
(iii) forfeited during the period;
(iv) exercised during the period;
(v) expired during the period;
(vi) outstanding at the end of the period; and
(vii) exercisable at the end of the period;
(c) for share options exercised during the period, the weighted average share price at
the date of exercise. If options were exercised on a regular basis throughout the
period, the entity may instead disclose the weighted average share price during the
period; and
(d) for share options outstanding at the end of the period, the range of exercise prices
and weighted average remaining contractual life. If the range of exercise prices is
wide, the outstanding options must be divided into ranges that are meaningful for
assessing the number and timing of additional shares that may be issued and the
cash that may be received upon exercise of those options. [IFRS 2.45].
The reconciliation in (b) above should, in our view, reflect all changes in the number of
equity instruments outstanding. In addition to awards with a grant date during the
period, the reconciliation should include subsequent additions to earlier grants e.g.
options or shares added to the award in recognition of dividends declared during the
period (where this is part of the original terms of the award), and changes to the number
of equity instruments as a result of demergers, share splits or consolidations and other
similar changes.
2722 Chapter 30
The following extract from the financial statements of Dairy Crest Group plc shows
additional awards from the reinvestment of dividends within the reconciliation of
outstanding awards.
Extract 30.1: Dairy Crest Group plc (2018)
Notes to the financial statements [extract]
27 Share-based payment plans [extract]
The number of share options and weighted average exercise price for each of the principal schemes is set out as follows:
LTAP* TIA* DBP* LTISP* Sharesave
Scheme
weighted
average
exercise price
number number number number number
(pence)
Options outstanding at
1,071,194 262,374 73,533 130,393 941,136
431.1
1 April 2017
Options granted during
217,007 – – – – –
the year
Reinvested
dividends 71,116
10,495 2,782 5,186
–
–
Options exercised during
(86,465) – –
(6,959)
(344,027)
377.2
the year
Options forfeited during
–
(9,017)
–
–
(70,241)
456.6
the year
Options outstanding at
1,272,852 263,852 76,315 128,620 526,868
462.8
31 March 2018
Exercisable
73,188 263,852 76,315 128,620
957
–
at 31 March 2018
[...]
*LTAP, TIA, DBP and LTISP options are nil cost options.
As drafted, the requirements in (b) to (d) above appear to apply only to share options.
However, since there is little distinction in IFRS 2 between the treatment of an option
with a zero exercise price and the award of a free share, in our view the disclosures
should not be restricted to awards of options.
13.2 Valuation of share-based payment arrangements
IFRS 2 requires an entity to ‘disclose information that enables users of the financial
statements to understand how the fair value of the goods or services received, or the
fair value of the equity instruments granted, during the period was determined’.
[IFRS 2.46].
As drafted, this requirement, and some of the detailed disclosures below, appears to
apply only to equity-settled transactions. However, it would be anomalous if detailed
disclosures were required about the valuation of an award to be settled in shares, but
not one to be settled in cash. In our view, therefore, the disclosures apply both to equity-
settled and to cash-settled transactions.
If the entity has measured the fair value of goods or services received as consideration
for equity instruments of the entity indirectly, by reference to the fair value of the equity
Share-based
payment
2723
instruments granted (i.e. transactions with employees and, in exceptional cases only,
with non-employees), the entity must disclose at least the following:
(a) for share options granted during the period, the weighted average fair value of
those options at the measurement date and information on how that fair value was
measured, including:
(i) the option pricing model used and the inputs to that model, including the
weighted average share price, exercise price, expected volatility, option life,
expected dividends, the risk-free interest rate and any other inputs to the
model, including the method used and the assumptions made to incorporate
the effects of expected early exercise;
(ii) how expected volatility was determined, including an explanation of the
extent to which expected volatility was based on historical volatility; and
(iii) whether and how any other features of the option grant were incorporated
into the measurement of fair value, such as a market condition;
(b) for other equity instruments granted during the period (i.e. other than share options),
the number and weighted average fair value of those equity instruments at the
measurement date, and information on how that fair value was measured, including:
(i) if fair value was not measured on the basis of an observable market price, how
it was determined;
(ii) whether and how expected dividends were incorporated into the
measurement of fair value; and
(iii) whether and how any other features of the equity instruments granted were
incorporated into the measurement of fair value;
(c) for share-based payment arrangements that were modified during the period:
(i) an explanation of those modifications;
(ii) the incremental fair value granted (as a result of those modifications); and
(iii) information on how the incremental fair value granted was measured,
consistently with the requirements set out in (a) and (b) above, where
applicable. [IFRS 2.47].
These requirements can be seen to some extent as an anti-avoidance measure. It would
not be surprising if the IASB had concerns that entities might seek to m
inimise the
impact of IFRS 2 by using unduly pessimistic assumptions that result in a low fair value
for share-based payment transactions, and the disclosures above seem designed to deter
entities from doing so. However, these disclosures give information about other
commercially sensitive matters. For example, (a)(i) above effectively requires disclosure
of future dividend policy for a longer period than is generally covered by such forecasts.
Entities may need to consider the impact on investors and analysts of dividend yield
assumptions disclosed under IFRS 2.
In our view, it is important for entities, in making these disclosures, to ensure that any
assumptions disclosed, particularly those relating to future performance, are consistent
with those used in other areas of financial reporting that rely on estimates of future
events, such as the impairment of property, plant and equipment, intangible assets and
2724 Chapter 30
goodwill, income taxes (recovery of deferred tax assets out of future profits) and
pensions and other post-retirement benefits.
If the entity has measured a share-based payment transaction directly by reference to
the fair value of goods or services received during the period, the entity must disclose
how that fair value was determined (e.g. whether fair value was measured at a market
price for those goods or services). [IFRS 2.48].
As discussed at 5.4 above, IFRS 2 creates a rebuttable presumption that, for an equity-
settled transaction with a counterparty other than an employee, the fair value of goods
and services received provides the more reliable basis for assessing the fair value of the
transaction. Where the entity has rebutted this presumption, and has valued the
transaction by reference to the fair value of equity instruments issued, it must disclose
this fact, and give an explanation of why the presumption was rebutted. [IFRS 2.49].
13.3 Impact of share-based payment transactions on financial
statements
IFRS 2 requires an entity to ‘disclose information that enables users of the financial
statements to understand the effect of share-based payment transactions on the entity’s
profit or loss for the period and on its financial position.’ [IFRS 2.50].
In order to do this, it must disclose at least:
(a) the total expense recognised for the period arising from share-based payment
transactions in which the goods or services received did not qualify for recognition
as assets and hence were recognised immediately as an expense, including separate
disclosure of that portion of the total expense that arises from transactions
accounted for as equity-settled share-based payment transactions;
(b) for liabilities arising from share-based payment transactions:
(i) the total carrying amount at the end of the period; and
(ii) the total intrinsic value at the end of the period of liabilities for which the
counterparty’s right to cash or other assets had vested by the end of the period
(e.g. vested share appreciation rights). [IFRS 2.51].
The disclosures section of IFRS 2 has a final paragraph requiring an entity to disclose
additional information about its share-based payments should the information
requirements set out above and at 13.1 and 13.2 above be insufficient to meet the general
disclosure principles of the standard. [IFRS 2.52].
As an example of such additional disclosure, IFRS 2 (as amended for periods beginning
on or after 1 January 2018) says that if an entity has classified any share-based payment
transactions as equity-settled when there is a net settlement feature for withholding tax
obligations (see 14.3.1 below), it should disclose the estimated future payment to the tax
authority when it is necessary to inform users of the financial statements about the
future cash flow effects of a share-based payment arrangement. [IFRS 2.52].
13.4 Example of IFRS 2 disclosures
An example of many of the disclosures required by IFRS 2 may be found in the financial
statements of Aviva plc for the year ended 31 December 2017.
Share-based
payment
2725
Extract 30.2: Aviva plc (2017)
Notes to the consolidated financial statements [extract]
31 – Group’s share plans
This note describes various equity compensation plans operated by the Group, and shows how the Group values the
options and awards of shares in the Company.
(a) Description of the plans
The Group maintains a number of active share option and award plans and schemes (the Group’s share plans). These
are as follows:
(i) Savings-related options
These are options granted under the tax-advantaged Save As You Earn (SAYE) share option scheme in the UK and
Irish revenue-approved SAYE share option scheme in Ireland. The SAYE allows eligible employees to acquire
options over the Company’s shares at a discount of up to 20% of their market value at the date of grant.
Options are normally exercisable during the six-month period following either the 3rd or 5th anniversary of the start
of the relevant savings contract. 7 year contracts were offered prior to 2012. Savings contracts are subject to the
statutory savings limits of £500 per month in the UK and €500 per month in Ireland. A limit of £250 per month was
applied to contracts in the UK prior to 2016.
(ii) Aviva long-term incentive plan awards
These awards have been made under the Aviva Long Term Incentive Plan 2011 (LTIP), and are described in section
(b) below and in the directors’ remuneration report.
(iii) Aviva annual bonus plan awards
These awards have been made under the Aviva Annual Bonus Plan 2011 (ABP), and are described in section (b)
below and in the directors’ remuneration report.
(iv) Aviva recruitment and retention share plan awards
These are conditional awards granted under the Aviva Recruitment and Retention Share Award plan (RRSAP) in
relation to the recruitment or retention of senior managers excluding executive directors. The awards vest in tranches
on various dates and vesting is conditional upon the participant being employed by the Group on the vesting date and
not having served notice of resignation. Some awards can be subject to performance conditions. If a participant’s
employment is terminated due to resignation or dismissal, any tranche of the award which has vested within the
12 months prior to the termination date will be subject to clawback and any unvested tranches of the award will lapse
in full.
(v) Aviva Investors deferred share award plan awards
These awards have been made under the Aviva Investors Deferred Share Award Plan (AI DSAP), where employees
can choose to have the deferred element of their bonus deferred into awards over Aviva shares. The awards vest in
three equal tranches on the 2nd, 3rd and 4th year following the year of grant.
(vi) Various all employee share plans
The Company maintains a number of active stock option and share award voluntary schemes:
a)
The global matching share plan
b)
Aviva Group employee share ownership scheme
c)
Aviva France employee profit sharing scheme.
No new Aviva plc ordinary shares will be issued to satisfy awards made under plans iv, v, vi b) or vi c).
; 2726 Chapter 30
(b) Outstanding options and awards
(i) Share options
At 31 December 2017, options to subscribe for ordinary shares of 25 pence each in the Company were outstanding
as follows:
Aviva savings related
Option
Number of
Normally
Option
Number of
Normally
share option scheme
price p
shares
exercisable
price p
shares
exercisable
310
38,340
2017
419
994,075
2017 or 2019
266
279,721
2017
380
4,818,109
2018 or 2020
268
221,659
2018
351
11,732,597
2019 or 2021
312
402,478
2018
409
5,644,448
2020 or 2022
Aviva Ireland savings
related share option
Option
Number of
Normally
Option
Number of
Normally
scheme (in euros)
price c
shares
exercisable
price c
shares
exercisable
336
5,499
2017
518
124,402
2018 or 2020
369
12,681
2018
418
494,845
2019 or 2021
527
34,749
2017 or 2019
447
292,975
2020 or 2022
The following table summarises information about options outstanding at 31 December 2017:
Weighted
average
remaining
Outstanding
contractual
Weighted average
options
life
exercise price
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 543
