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).
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