IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

391

Chapter 34/ Share-Based Payments (IFRS 2)

May 3], 20X8

425,000 158,333 158,333

Compensation charge [5,000 x (20 - 3) x 5] Employee benefits expense (425,000 - 266,667) Equity (separate component)

Recording shares issued Dr Equity accumul ation account Cr Equity share capita l Share premium

425,000 85,000 340,000

August 1, 20X8

255,000 255,000

Cash received 5,000 x 17 x $3 Share premium

Tax Consequences

May 31, 20X8 August 1, 20X8 (vesting date) (exercise date)

May 31 20X6 May 31 20X7

Intrinsic value (Share price - Exercise price) Options expected to vest

$10

$ 11

$4

$7

85,000

85,000

90,000

80,000

s

$.

$.

$.

180,000'

373,333 '

850,000

945 ,000

Tax benefit (intrinsic value) Compensation expen se (cumulative) Deferred tax asset @ 30% of tax benefit Tax receivable Movement in deferred tax asset Recognized in profit/loss Recognized in equity

425,000

425,000

225,000

266,667

54,000

112,000

255,000

283,500'

143,000 47,500' 95,500 (balance)

(255,000) (127,500) (127,500)

54,000 54,000

58,000

26,000' 32,000 (balance)

, (90,000 x 4 x 112) , (80,000 x 7 x 2/3) s (945 x 0.3) , (266,667 x 30% - 54,000) s (425,000 x 30% - 54,000 - 26,000) IFRIC 8, Scope of [FRS 2, clarifies that IFRS 2, Share-Based Payment, applies to arrangements where an entity makes share-based payments for apparently ni l or inadequate consideration. 9. RECENT AMENDMENTS TO IFRS 2 EFFECTIVE FOR ANNUAL PERIODS BEGIN– NING ON OR AFTER JANUARY 1,2009 9.1 On January 17, 2008 , the IASB issued amendments to IFRS 2. These revisions primarily seek to clarify the definition of "vesting conditions" and also the accounting treatment of cancellations by the counterparty to a share-based payment agreement. These revisions to the Standard are effective for annual periods beginning on or after January I, 2009, with earlier application permitted. The main amendments to IFRS 2 are briefly explained below . 9.1.1 Vesting conditions. Vesting conditions are terms attached to a share-based payment arrangement that must be met by the counterparty to the agreement (say, an employee) before getti ng entitled to receive cash , other assets, or equity instruments of the entity. According to the existi ng requirements of IFRS 2 vest– ing conditions include a. Service conditions, that is, stipulations in a share-based payment arrangement that the counterparty (say, an employee) should work for the entity for a period of time (say, 5 years of continuous service) before qualifying for the share-based payment; and b. Performance conditions, that is, requirement in a share-based agreement that requires a counterparty (say, the newly appointed "chief executive officer") to achieve a predeter– mined "performance" target over a period of time (say, increase of net margin from 5% to 15% in three years from the date of share-based payment arrangement).