IFRS 2: Share-based Payments | Learn with FC Training (2024)

Q1: What is IFRS 2?

IFRS 2 is an International Financial Reporting Standard that sets out the accounting requirements for share-based payment transactions, such as stock options and restricted stock units (RSUs). It specifies how an entity should account for these transactions and disclose information about them in its financial statements.

Q2: What is a share-based payment transaction?

A share-based payment transaction is a transaction in which an entity receives goods or services from another party and the payment for those goods or services is based on the price of the entity's own equity instruments.

Q3: What are some examples of share-based payment transactions?

Examples of share-based payment transactions include:

• Stock options: An entity grants its employees or executives the right to purchase a certain number of shares at a predetermined price.
• Restricted stock units (RSUs): An entity grants its employees or executives the right to receive a certain number of shares after a specified period of time.
• Performance shares: An entity grants its employees or executives the right to receive a certain number of shares if certain performance criteria are met.

Q4: How should an entity account for a share-based payment transaction under IFRS 2?

Under IFRS 2, an entity should:

• Recognize the fair value of the goods or services received as an expense in its profit or loss or as an asset if the goods or services qualify for recognition as an asset.
• Recognize a corresponding increase in equity if the goods or services were received in exchange for equity instruments.
• Recognize the fair value of the equity instruments granted as an expense in its profit or loss or as an asset if the equity instruments qualify for recognition as an asset.
• Recognize a corresponding increase in equity if the equity instruments were granted in exchange for goods or services.
• Measure the fair value of the goods or services received and the equity instruments granted at the date of the grant.

Q5: How should an entity determine the fair value of a share-based payment transaction?

An entity should determine the fair value of a share-based payment transaction based on the fair value of the equity instruments granted, taking into account any vesting conditions or other restrictions on the equity instruments. The fair value should be determined using an appropriate valuation model, such as the Black-Scholes model or the binomial model.

Q6: What disclosures are required under IFRS 2?

IFRS 2 requires an entity to disclose:

• The nature and extent of share-based payment arrangements that existed during the period.
• The fair value of equity instruments granted during the period.
• The assumptions used in determining the fair value of equity instruments granted.
• The amount of share-based payment expense recognized in its profit or loss or as an asset.
• The number of equity instruments granted during the period, and the number of equity instruments outstanding at the end of the period.
• The effect of share-based payment transactions on its financial position, financial performance, and cash flows.