1.5 Share Based Payments

IFRS 2, or International Financial Reporting Standard 2, is a standard issued by the International Accounting Standards Board (IASB) that provides guidance on accounting for share-based payment transactions. It applies to entities that grant equity-settled or cash-settled share-based payments to employees or non-employees.

Here is a summary of the key provisions of IFRS 2:

1. Scope: IFRS 2 applies to all share-based payment transactions, including equity instruments (such as shares or share options) and cash-settled awards, granted in exchange for goods or services.
2. Recognition and Measurement: Under IFRS 2, the fair value of the share-based payment is recognized as an expense over the vesting period, which is the period during which the employees become entitled to the share-based payment. The fair value is determined at the grant date of the equity instrument or at each reporting date for cash-settled awards. The standard requires the use of appropriate valuation techniques to estimate the fair value.
3. Vesting Conditions: IFRS 2 distinguishes between service conditions and performance conditions. Service conditions require the employees to complete a specified period of service, while performance conditions relate to the achievement of specific performance targets. The standard requires the recognition of the expense over the vesting period, considering the probability of meeting the vesting conditions.
4. Modification of Awards: If the terms or conditions of a share-based payment arrangement are modified, IFRS 2 requires a reassessment of the fair value of the award at the date of modification. Any incremental fair value is recognized as an expense over the remaining vesting period.
5. Cash-Settled Awards: For cash-settled share-based payment transactions, the liability is measured initially at the fair value and is subsequently remeasured at each reporting date until settlement. Changes in the fair value are recognized as an expense or income in the profit and loss statement.
6. Disclosure: IFRS 2 requires extensive disclosures related to share-based payment transactions, including the policy for accounting for share-based payments, the fair value of the awards granted, details of vesting conditions, the expense recognized in the financial statements, and the impact on earnings per share.