Shared_Based_Payment

Shared based reporting can be classified 2 ways, either as a liability instrument or an equity instrument. Equity instruments require a company to issue equity shares to employees. If you decide to use equity instruments you are required either to issue equity shares, phantom stock, or, stock options and similar share settled stock appreciation rights or SARs. If you should decide the use liability instruments then you have to us cash or noncash assets. The most frequently used liability instruments are cash settled stock items and cash settled SARs. http://www.journalofaccountancy.com/Issues/2007/Apr/ARoadMapForShareBasedCompensation.htm There are three features that can be used to identify a share based transaction with employee program: 1. Employees that are shareholders are granted additional benefits Additional benefits indicate the entity is dealing with the individuals as employees or providers of services rather than as investors or equity holders. Examples of additional benefits include: • Employees have the right to additional shares if the business performs well (often referred to as a ratchet mechanism). • Employees’ rights depend on whether the entity floats or is sold through a trade sale (ie, in the event of a trade sale an employee may automatically get a cash payment or a number of shares). 2. The arrangement incorporates ‘leaver conditions’Such conditions indicate the entity is dealing with the individuals as employees or providers of services rather than as investors or equity holders. For example, the employee only receives the shares if they remain an employee or if they are required to sell their shares back to the entity when they resign. 3. The arrangement involves a trust The existence of an employee benefit trust that buys back shares from employees suggests that the shares are being used to obtain employee services. http://www.pwc.com/en_GX/gx/ifrs-reporting/pdf/Practical_guide_to_share-based_payments_-_2011_update.pdf In June 2009 the IASB released amendments to the IFRS 2 Share-based Payment that helps in better understanding for reporting group cash-settled share-base payment transactions. These amendments make it easier to account for some share-based payment arrangement on your financial statements. The amendments explain that: • An entity that receives goods or services in a share-based payment arrangement must account for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction is settled in shares or cash. • In IFRS 2 a 'group' has the same meaning as in IAS 27 Consolidated and Separate Financial Statements, that is, it includes only a parent and its subsidiaries. http://www.iasplus.com/en/standards/standard42