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Financial Reporting · Ind AS 102 Share Based Payment

Group Share-Based Payment Transactions under Ind AS 102

Updated 5 October 2026 · Fact-checked

Group share-based payment is when employees of one group entity get awards settled by or in shares of another group entity. Each entity decides its own accounting: equity-settled if the award is its own equity or it has no obligation to settle, otherwise cash-settled. Parent credits investment in subsidiary; consolidated statements treat the group as one.

Understand Group Share-Based Payment Transactions

In many groups, the parent grants options over its own shares to employees of its subsidiaries. The subsidiary gets the employees' services. The parent issues the shares. So the entity that receives the services and the entity that settles the award are different. Ind AS 102 covers this through the group provisions (para 3A and paras 43A to 43D).

The core idea: each entity accounts from its own point of view. The entity receiving the services (usually the subsidiary) asks two questions. What is the nature of the award: its own equity or someone else's? Does it have an obligation to settle? Para 43B says it measures the services as equity-settled when the award is its own equity instruments, or when it has no obligation to settle. In every other case it measures them as cash-settled.

In the subsidiary's own financial statements, when the parent settles with parent shares and the subsidiary has no obligation, the subsidiary books an expense over the vesting period at grant-date fair value. The credit goes to equity, as a capital contribution from the parent. It is remeasured only for non-market vesting conditions (expected number of employees who vest), not for share price changes.

In the parent's separate financial statements, the parent is the entity settling. Under para 43C, it recognises the transaction as equity-settled only if it settles in its own equity instruments. Otherwise it is cash-settled. Because the parent receives no services directly, it debits investment in subsidiary (capital contribution) and credits equity (or a liability, if cash-settled).

In the consolidated financial statements, the group is one entity. The group expense is recognised. P Ltd's debit to investment in the subsidiary is eliminated against the subsidiary's capital contribution credit. The parent's credit to the share-based payment reserve is not eliminated. It stays in group equity and matches the expense. If the parent's shares are held through an ESOP trust that the company controls, the trust is consolidated under Ind AS 110. Shares held by the trust are treasury shares and are deducted from equity. No gain or loss goes to profit or loss on buying, selling or reissuing them.

Key rules to remember

Para 43B: equity-settled test (receiving entity)
Equity-settled if (award = own equity instruments) OR (entity has no obligation to settle). Otherwise cash-settled.
Applied separately by each entity in its own financial statements. Equity-settled awards are remeasured only for non-market vesting conditions.
Para 43C: settling entity test
Settling entity: equity-settled only if settled in its own equity instruments. Otherwise cash-settled.
Parent settling in its own shares: equity-settled. Parent settling in cash: cash-settled. Para 43D deals with recharge arrangements between group entities.
Cumulative expense (equity-settled)
Cumulative expense = Grant-date fair value × Number of awards expected to vest × (Time elapsed ÷ Vesting period)
Yearly charge = cumulative expense at year end − cumulative expense at previous year end.
Parent's separate entry (own shares to subsidiary employees)
Dr Investment in subsidiary; Cr Equity (share-based payment reserve)
The amount equals the subsidiary's yearly expense. It is a capital contribution, not a P&L item for the parent.
Subsidiary's entry (no obligation to settle)
Dr Employee benefit expense; Cr Equity (capital contribution from parent)
Same amount as the parent's investment entry.
Consolidated entry
Dr Employee benefit expense; Cr Share-based payment reserve (parent's equity credit). Parent's investment in subsidiary is eliminated against the subsidiary's capital contribution credit.
The group sees one expense, once. The parent's reserve credit remains in group equity.
ESOP trust (controlled by company)
Shares bought by trust: Dr Treasury shares (equity); Cr Cash. No profit or loss on reissue.
The loan from company to trust and its repayment are intragroup and eliminated on consolidation.

How to solve Group Share-Based Payment Transactions questions

Use this method for any group share-based payment question. Do the entities one at a time and keep each set of financial statements separate.

  1. 1Identify the entities: who receives the services (usually the subsidiary), who grants the award, and who settles it (parent, subsidiary, trust or shareholder).
  2. 2Identify the instrument: is the award over the parent's shares, the subsidiary's own shares, or a cash amount linked to share price?
  3. 3Apply para 43B to the receiving entity. Own equity or no obligation to settle means equity-settled. Otherwise cash-settled.
  4. 4Apply para 43C to the settling entity. Settled in its own equity means equity-settled. Otherwise cash-settled.
  5. 5Compute the expense: grant-date fair value × awards expected to vest × time elapsed ÷ vesting period, less amounts already charged. Revise only the number expected to vest for equity-settled awards.
  6. 6Write the journal entries separately: subsidiary's books, parent's separate books, then consolidated. In the parent's books, debit investment in subsidiary.
  7. 7On consolidation, eliminate the parent's investment against the subsidiary's capital contribution credit. Show one group expense, with the parent's share-based payment reserve remaining in group equity. If a controlled ESOP trust exists, consolidate it and deduct its shares as treasury shares.
  8. 8State the conclusion in one line: classification and reason (para 43B or 43C), with the amount.

Quickest way: Two-question shortcut: whose shares, who pays

When to use it: Use when a question gives limited time and asks only for classification or the journal entries in one set of financial statements.

  1. Ask: are the awards over my own shares, or does my entity have no duty to pay? If yes, equity-settled.
  2. If I must pay cash or assets, cash-settled.
  3. Parent in separate books: debit investment in subsidiary, credit equity (own shares) or liability (cash).
  4. Subsidiary: expense with credit to equity (capital contribution) when it has no obligation.
  5. Consolidated: one expense. Investment is eliminated against the subsidiary's capital contribution; the parent's reserve credit stays in equity. Treasury shares of a controlled trust reduce equity.

Common mistakes in Group Share-Based Payment Transactions

  • Debiting the parent's profit or loss with the expense for subsidiary employees.

    Students copy the subsidiary's entry into the parent's books.

    Fix: The parent receives no services directly. In its separate books, debit investment in subsidiary and credit equity. The expense sits in the subsidiary and in consolidation.

  • Classifying the award once for the whole group and using the same answer everywhere.

    Students forget that para 43B and 43C apply to each entity on its own rights and obligations.

    Fix: Test the receiving entity under 43B and the settling entity under 43C separately. Consolidated statements follow the group's view.

  • Remeasuring an equity-settled award for changes in share price.

    Confusion with cash-settled awards, which are remeasured at each reporting date.

    Fix: Equity-settled awards are fixed at grant-date fair value. Only the number expected to vest (non-market vesting conditions) is revised.

  • Forgetting to eliminate the investment entry on consolidation, so the expense or equity is double counted.

    Students stop at the separate financial statements.

    Fix: On consolidation, eliminate the parent's increase in investment against the subsidiary's capital contribution credit. The expense remains, and the parent's share-based payment reserve credit remains in group equity.

  • Taking gain or loss to profit or loss when an ESOP trust sells or reissues shares to employees.

    Students treat the trust shares like an investment.

    Fix: Shares held by a controlled trust are treasury shares. Deduct them from equity, and take any difference on reissue within equity.

  • Ignoring the subsidiary's obligation to pay the parent.

    Students assume parent-share awards are always equity-settled for the subsidiary.

    Fix: Read the facts. If the subsidiary must settle in cash or other assets, para 43B makes it cash-settled for the subsidiary.

Worked examples

Example 1

Case: P Ltd grants 100 options over its own shares to each of 50 employees of its wholly owned subsidiary S Ltd on 1 April 2026. Vesting period is 3 years. Grant-date fair value is ₹120 per option. P Ltd settles by issuing its own shares, and S Ltd has no obligation to settle. At 31 March 2027, 45 employees are expected to vest. At 31 March 2028, 44 are expected to vest. Show the entries for the first two years in S Ltd, in P Ltd's separate books, and on consolidation.

Show the solution
  1. Classification: the awards are P Ltd's own equity and S Ltd has no obligation to settle. Under para 43B, S Ltd treats the transaction as equity-settled. P Ltd settles in its own equity, so under para 43C it is also equity-settled.
  2. Year 1: 45 employees × 100 options = 4,500 options. Total = 4,500 × ₹120 = ₹5,40,000. Cumulative at 1/3 = ₹1,80,000. Year 1 charge = ₹1,80,000.
  3. Year 2: 44 × 100 = 4,400 options. Total = 4,400 × ₹120 = ₹5,28,000. Cumulative at 2/3 = ₹3,52,000. Year 2 charge = ₹3,52,000 − ₹1,80,000 = ₹1,72,000.
  4. S Ltd's books: Year 1, Dr Employee benefit expense ₹1,80,000; Cr Equity (capital contribution from parent) ₹1,80,000. Year 2: same entry for ₹1,72,000.
  5. P Ltd's separate books: Year 1, Dr Investment in S Ltd ₹1,80,000; Cr Equity (share-based payment reserve) ₹1,80,000. Year 2: ₹1,72,000 each way.
  6. Consolidation: P Ltd's debit to investment in S Ltd (₹1,80,000 in Year 1, ₹1,72,000 in Year 2) is eliminated against S Ltd's capital contribution credit of the same amount. The expense remains in the group's profit or loss. The credit to P Ltd's share-based payment reserve remains in group equity. Net consolidated effect: Dr Employee benefit expense ₹1,80,000 and ₹1,72,000; Cr Share-based payment reserve (equity) ₹1,80,000 and ₹1,72,000.

Answer: Equity-settled in S Ltd, P Ltd and the group. Expense is ₹1,80,000 in Year 1 and ₹1,72,000 in Year 2 (cumulative ₹3,52,000). P Ltd debits investment in S Ltd, not profit or loss. On consolidation, the investment and S Ltd's capital contribution are eliminated; the expense and P Ltd's share-based payment reserve credit remain in group equity.

Example 2

Case: H Ltd controls an ESOP trust. The trust borrows ₹20,00,000 from H Ltd and buys 10,000 H Ltd shares at ₹200 each from the market. H Ltd grants 10,000 options to its employees with an exercise price of ₹150 and a grant-date fair value of ₹60 per option. The vesting period is 2 years and all options are expected to vest. All options are exercised after vesting, and the trust delivers the shares. Show the consolidated accounting.

Show the solution
  1. Treatment of trust: H Ltd controls the trust, so it is consolidated under Ind AS 110. The loan between H Ltd and the trust, and its later repayment, are intragroup and are eliminated.
  2. Separate books on purchase: H Ltd records Dr Loan receivable from trust ₹20,00,000; Cr Cash ₹20,00,000. The trust records Dr Cash ₹20,00,000; Cr Loan payable to H Ltd ₹20,00,000, then Dr Shares in H Ltd ₹20,00,000; Cr Cash ₹20,00,000 (its external payment to the market).
  3. Consolidation on purchase: H Ltd's loan receivable and the trust's loan payable (₹20,00,000 each) are eliminated. The cash movement between H Ltd and the trust nets to nil. The only external cash outflow is the trust's payment of ₹20,00,000 to the market. Consolidated entry: Dr Treasury shares (deducted from equity) ₹20,00,000; Cr Cash ₹20,00,000. No profit or loss arises.
  4. Expense per year: 10,000 × ₹60 = ₹6,00,000 total. Yearly charge = ₹6,00,000 × 1/2 = ₹3,00,000. Dr Employee benefit expense ₹3,00,000; Cr Share-based payment reserve ₹3,00,000, in each of two years.
  5. On exercise: cash received from employees = 10,000 × ₹150 = ₹15,00,000. This is the only external cash received. If the trust uses this cash to repay its loan to H Ltd, that repayment is intragroup and is eliminated. The reserve of ₹6,00,000 is transferred out.
  6. Consolidated entry on exercise: Dr Cash ₹15,00,000; Dr Share-based payment reserve ₹6,00,000; Cr Treasury shares ₹20,00,000; Cr Other equity (e.g. securities premium) ₹1,00,000. Check: debits ₹21,00,000 = credits ₹21,00,000.
  7. The ₹1,00,000 is the balancing difference between cash received plus reserve released (₹21,00,000) and the cost of the treasury shares (₹20,00,000). It is taken within equity, for example to securities premium. It is not a gain or loss and is not a profit or loss item.
  8. No gain or loss goes to profit or loss on reissue of treasury shares.

Answer: Expense of ₹3,00,000 a year for two years. The loan between H Ltd and the trust is eliminated on consolidation, so the only external outflow on purchase is the trust's ₹20,00,000 payment to the market, shown as treasury shares in equity. On exercise, external cash received is ₹15,00,000. The ₹1,00,000 credit is the balancing difference between cash plus reserve (₹21,00,000) and the treasury share cost (₹20,00,000), taken within equity (e.g. securities premium). It is not a profit or loss item, and nothing goes to profit or loss on reissue.

Exam tips

  • Write the classification with its reason first: 'equity-settled, as awards are own equity / no obligation to settle (para 43B)'. This earns the conclusion marks quickly.
  • Always give separate entries for the subsidiary, the parent's separate books and consolidation. Examiners often ask for all three.
  • In case-scenario MCQs, look for who pays and whose shares. Those two facts decide the classification.
  • For ESOP trust questions, state that the trust is consolidated under Ind AS 110, its shares are treasury shares in equity, and the trust's loan from the company is eliminated.
  • Show the expense working in one clean line: fair value × expected awards × elapsed fraction, minus the previous cumulative charge.

Practice questions from Ind AS 102 Share Based Payment

Group Share-Based Payment Transactions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Group Share-Based Payment Transactions: frequently asked questions

What does para 43B of Ind AS 102 say?

It tells the entity receiving goods or services when to treat a group share-based payment as equity-settled. That is when the awards are its own equity instruments, or when it has no obligation to settle. In all other cases it is treated as cash-settled. Para 43C gives the test for the entity that settles the award.

How does a parent account for options granted to subsidiary employees in its separate financial statements?

If the parent settles in its own shares, it recognises an equity-settled transaction. It debits investment in subsidiary and credits equity. It does not charge profit or loss, because the services go to the subsidiary.

How is an ESOP trust treated in consolidated financial statements?

If the company controls the trust, it is consolidated under Ind AS 110. Shares held by the trust are deducted from equity as treasury shares. No gain or loss goes to profit or loss on their purchase, sale or reissue. The company's loan to the trust is eliminated.

Does the subsidiary remeasure an equity-settled group award each year?

No. It uses the grant-date fair value. It revises only the number of awards expected to vest for non-market vesting conditions. Share price changes do not change the expense.