Financial Reporting · Ind AS 102 Share Based Payment

Ind AS 102 Scope, Definitions and Recognition Principles

Updated 5 October 2026 · Fact-checked

A share-based payment is a transaction where an entity receives goods or services and pays with its own equity instruments or with cash based on their price. To solve questions, identify the type of settlement, the grant date, the vesting conditions, then recognise the goods or services received with an equity credit or a liability.

Understand Ind AS 102 Scope, Definitions and Recognition Principles

Companies often pay employees and suppliers not in cash but in shares, or in cash linked to the share price. Ind AS 102 tells you how to account for this. Without it, the cost of such pay would never reach the Statement of Profit and Loss.

The core idea is simple. When you receive goods or services, you recognise them (as an expense or an asset) when you receive them. The other side of the entry depends on how you settle. If you settle with equity instruments, credit equity. If you settle with cash based on share price, credit a liability.

There are three types of transaction. Equity-settled: the entity receives goods or services and issues its own equity instruments. Cash-settled: the entity receives goods or services and incurs a liability to pay cash based on the price (or value) of its own equity instruments. With cash alternatives: the entity or the supplier can choose whether settlement is in cash or equity.

The scope covers all share-based payments, with some exclusions (para 5). It does not apply to:

transactions in a business combination as defined by Ind AS 103, combinations of entities or businesses under common control as described in Ind AS 103 Appendix C, and the contribution of a business on formation of a joint venture. Equity instruments issued to employees of the acquiree in their capacity as employees (for example, in return for continued service) remain within Ind AS 102.
share-based payment transactions in the form of contracts to buy or sell non-financial items that are within the scope of Ind AS 32 and Ind AS 109 (paras 8-10 of Ind AS 32 and paras 2.4-2.7 of Ind AS 109), that is, net-settleable commodity-type contracts.

Para 6A makes the standard apply to goods or services received even if the entity cannot identify specifically some or all of them. It applies where the identifiable consideration received (the fair value of identifiable goods or services) is less than the fair value of the instruments granted or the liability incurred. The difference suggests that other consideration has been or will be received. You measure the unidentifiable part as the fair value of the share-based payment less the fair value of the identifiable goods or services received.

Key definitions drive the numbers. Grant date is the date the entity and the other party agree to the arrangement, with a shared understanding of its terms, and approval where needed. Vesting period is the period during which all specified vesting conditions must be satisfied. Vesting conditions are the conditions that decide whether the entity receives the services and so whether the other party earns the award. They include service conditions and performance conditions. A service condition needs the counterparty to complete a specified period of service. A performance condition needs a specified performance target, along with a service requirement. The target relates either to the operations or activities of the entity or another entity in the same group (a non-market condition, such as profit), or to the price of the entity's or a group entity's equity instruments (a market condition). Conditions that are neither service nor performance conditions are non-vesting conditions, for example a requirement to keep saving up to the vesting date. Non-vesting conditions are reflected in the grant date fair value. If a non-vesting condition within the control of the entity or the counterparty is not met, it is treated as a cancellation, and the remaining expense is accelerated. Fair value under Ind AS 102 (Appendix A) is the amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm's length transaction. Ind AS 113 excludes share-based payment transactions within Ind AS 102 from its scope, so you use the Ind AS 102 definition.

Key rules to remember

Equity-settled entry: Dr Expense (or Asset) ; Cr Equity (e.g. ESOP outstanding); Goods or services received are recognised as they are received. Credit goes to equity. No later remeasurement of the equity credit for fair value changes.
Cash-settled entry: Dr Expense (or Asset) ; Cr Liability; The liability is remeasured at fair value at each reporting date and settlement date, with changes in profit or loss.
Unidentifiable goods or services (para 6A): Value of unidentified goods or services = Fair value of share-based payment − Fair value of identifiable goods or services received; Applies when the identifiable goods or services appear to be worth less than the fair value of the instruments granted. Cash paid is not itself identifiable goods or services.
Employee transactions: measurement basis: Equity-settled with employees: measure at fair value of equity instruments granted, at grant date; Fair value of services received cannot usually be estimated reliably, so the instruments' fair value is used.
Vesting period: Vesting period = period during which all vesting conditions must be satisfied, ending on the vesting date; Vesting date is when all vesting conditions are met. Services are recognised over this period. Service can begin before grant date. The expense for that earlier period is based on an estimated grant date fair value, which is revised to the actual grant date fair value once grant date is established, with the cumulative effect trued up.
Vesting condition types: Vesting conditions = Service conditions + Performance conditions (market and non-market); Market conditions are performance conditions and are vesting conditions. Non-vesting conditions are conditions that are neither service nor performance conditions, for example a requirement to keep saving. They are reflected in the grant date fair value, not in the vesting estimate. If a non-vesting condition within the control of the entity or the counterparty is not met, it is treated as a cancellation and the remaining expense is accelerated.

How to solve Ind AS 102 Scope, Definitions and Recognition Principles questions

Use this order for any scope, definition or basic recognition question on Ind AS 102.

1Read the facts and ask: is the entity receiving goods or services, and paying with its own equity or an amount linked to its own equity price? If not, Ind AS 102 may not apply.
2Check scope exclusions: business combination (and common control combinations and JV formation covered by Ind AS 103), and contracts to buy or sell non-financial items within the scope of Ind AS 32 and Ind AS 109 (paras 8-10 of Ind AS 32 and paras 2.4-2.7 of Ind AS 109), that is, net-settleable commodity-type contracts.
3Classify the settlement: equity-settled, cash-settled, or a choice of settlement.
4Fix the grant date by asking when both parties agreed the terms and any needed approval was obtained.
5List each condition and label it: service condition, non-market performance condition, market condition, or non-vesting condition. Find the vesting period.
6Decide the measurement basis: fair value of the instruments (employees and equity-settled), or fair value of goods or services (non-employees, if reliably measurable).
7Pass the entry: debit expense or asset, credit equity or liability. State your reasoning with the paragraph logic and conclude.

Quickest way: Three-question check

When to use it: Use for short MCQs and for 2-3 mark theory parts where you must classify quickly.

Who pays and with what? Own equity gives equity-settled. Cash based on own share price gives cash-settled.
What is the date? Grant date is when terms are agreed and understood, not when the board first considers it or when options are exercised.
What is the condition? Only service gives a service condition. Service plus a target gives a performance condition. If the target relates to the operations or activities of the entity or another entity in the same group (such as profit), it is non-market. If it relates to the price of the entity's or a group entity's equity instruments, it is a market condition. A condition that is neither service nor performance, such as a requirement to keep saving, is a non-vesting condition.

Common mistakes in Ind AS 102 Scope, Definitions and Recognition Principles

Treating the date of board approval as grant date even when employees have not been told the terms or approval from shareholders is still pending.
Students link grant to the entity's action alone.
Fix: Grant date needs a shared understanding of terms with the counterparty, and any needed approval. Check both.
Calling every target a service condition.
The word 'condition' is used loosely in the question.
Fix: A service condition is only about completing a period of service. If a target such as profit or share price is also needed, it is a performance condition.
Applying Ind AS 102 to shares issued in a business combination.
Shares are issued, so students assume share-based payment.
Fix: Business combinations are scoped out of Ind AS 102 and covered by Ind AS 103. Check the reason the shares are issued.
Remeasuring the equity credit each year in an equity-settled plan.
Students copy the cash-settled approach.
Fix: Equity-settled awards are measured once at grant date fair value. Only cash-settled liabilities are remeasured.
Ignoring para 6A when shares are issued for apparently less than fair value.
Students look only for identifiable consideration.
Fix: If the identifiable goods or services are worth less than the fair value of instruments issued, the shortfall indicates unidentifiable goods or services, and Ind AS 102 still applies.

Worked examples

Example 1

Case: Zenith Ltd (an Ind AS company) announces on 1 April 2026 an option scheme for 100 senior managers. Each gets 1,000 options, vesting on 31 March 2029 if the manager remains employed and the company's cumulative profit exceeds ₹50 crore. The board approved the scheme on 15 March 2026. Employees were told the full terms and accepted on 1 April 2026, and they start rendering service from that date. Shareholders' approval was received on 20 April 2026. Identify the grant date, the vesting period, the type of transaction and the nature of the conditions.

Show the solution

Grant date needs a shared understanding of terms and any required approval. Employees accepted terms on 1 April 2026, but shareholders' approval was received on 20 April 2026.
Since the shareholder approval is needed, grant date is 20 April 2026, not 15 March or 1 April.
Services start on 1 April 2026, before grant date. So Zenith estimates the grant date fair value for the period before grant date and recognises the expense from the service commencement date, 1 April 2026. Once grant date is established, it revises the earlier estimate to the actual grant date fair value, with the cumulative effect trued up.
The vesting period is the period in which all vesting conditions must be satisfied. It runs from the start of service on 1 April 2026 to 31 March 2029.
Zenith will issue its own equity options in return for services, so this is an equity-settled share-based payment.
Continued employment is a service condition. The cumulative profit target is an additional non-market performance condition, as it relates to the operations of the entity and not to the price of its equity instruments.
Services are recognised over the vesting period with the credit to equity.

Answer: Grant date: 20 April 2026. Service starts 1 April 2026, so expense is recognised from then on an estimated grant date fair value. That estimate is revised to the actual grant date fair value once grant date is established, with the cumulative effect trued up. The vesting period runs to 31 March 2029. Equity-settled. Service condition (continued employment) plus a non-market performance condition (profit above ₹50 crore).

Example 2

Case: Brightline Ltd (Ind AS) issues 10,000 shares to a consultancy firm. The fair value of each share is ₹300. The firm provides advisory services that Brightline can identify and value at ₹10,00,000. Brightline believes the firm has also provided other benefits it cannot separately identify, such as access to its network. Explain the accounting basis under Ind AS 102 and compute the value of the unidentified goods or services.

Show the solution

Check scope: Brightline receives goods or services and issues its own equity, so it is an equity-settled share-based payment.
Fair value of shares issued = 10,000 × ₹300 = ₹30,00,000.
Fair value of identifiable services received = ₹10,00,000.
Under para 6A, if the identifiable goods or services are worth less than the fair value of the instruments issued, the difference indicates unidentified goods or services.
Unidentified goods or services = ₹30,00,000 − ₹10,00,000 = ₹20,00,000.
Measure the unidentified amount at grant date, as the difference between the fair value of the share-based payment and the fair value of the identifiable services. Recognise the cost as the goods or services are received, with the credit to equity.

Answer: Ind AS 102 applies. The unidentified goods or services are valued at ₹20,00,000 (₹30,00,000 less ₹10,00,000).

Exam tips

For case MCQs, find the grant date first. Many options are traps built on the wrong date.
Learn the three settlement types and one-line features of each. Short theory questions often ask only for these.
When a question asks about a condition, label it before you compute. The label decides the treatment later.
Write answers in provision-facts-conclusion form: state the Ind AS 102 rule, apply the case facts, then state the entry or conclusion.
Always mention the scope exclusions when asked for scope, especially business combinations.

Practice questions from Ind AS 102 Share Based Payment

Ind AS 102 Scope, Definitions and Recognition Principles in other exams

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

Ind AS 102 Scope, Definitions and Recognition Principles: frequently asked questions

What is a share-based payment under Ind AS 102?

It is a transaction where an entity receives goods or services and pays with its own equity instruments, or pays cash linked to the price of its equity. ESOPs and stock appreciation rights are common examples.

What is the difference between a service condition and a performance condition?

A service condition only requires the counterparty to complete a specified period of service. A performance condition requires a specified target as well as a period of service. The target relates either to the operations or activities of the entity or another entity in the same group (non-market), or to the price of the entity's or a group entity's equity instruments (market).

What is grant date under Ind AS 102?

It is the date the entity and the other party agree to the arrangement, with a shared understanding of its terms. If the agreement needs approval, for example by shareholders, grant date is when that approval is obtained.

What does para 6A cover?

It brings within Ind AS 102 transactions where the entity cannot identify specifically some or all goods or services received. If the identifiable goods or services are worth less than the fair value of the instruments granted, the difference suggests that unidentified goods or services have been received.