Corporate Financial Reporting · Share based Payment (Ind AS 102)

Ind AS 102 Scope and Key Definitions Explained

Updated 11 October 2026 · Fact-checked

Ind AS 102 covers transactions where an entity receives goods or services and pays with its own shares, options or cash linked to its share price. There are three types: equity-settled, cash-settled and choice-of-settlement. To solve questions, identify the type, the grant date and the vesting period, then measure accordingly.

Understand Ind AS 102 Scope and Key Definitions

A share-based payment is a deal where a company gets goods or services and pays for them in shares, share options, or cash amounts based on its share price. The most common case is an Employee Stock Option Plan (ESOP). The company gets employee service now and gives the employee an option on its shares later.

Ind AS 102 makes the company record the cost of that service as an expense, with a matching credit. Without it, a company could pay staff with options and show no cost in profit or loss.

There are three types. In an equity-settled transaction, the company pays with its own equity instruments. In a cash-settled transaction, the company pays cash based on the price of its shares, for example share appreciation rights. In a choice-of-settlement transaction, either the company or the counterparty can choose cash or equity. Where the counterparty chooses, the company has granted a compound financial instrument with a debt component (the right to demand cash) and an equity component (the right to take equity instead).

Scope has limits. Ind AS 102 does not apply where goods or services are acquired under a contract within the scope of paragraphs 8 to 10 of Ind AS 32 or paragraphs 2.4 to 2.7 of Ind AS 109. Also, 'fair value' in Ind AS 102 is measured as this Standard requires, not under Ind AS 113, as paragraph 6A says.

Learn the key terms. Grant date is when the company and the counterparty agree the arrangement, so a shared understanding of terms exists. Vesting conditions are the service or performance conditions that must be met before the counterparty becomes entitled to the payment. Vesting period is the period over which all the vesting conditions are to be satisfied. Measurement date is the date at which fair value is fixed. Intrinsic value is the difference between the fair value of the shares the counterparty has the right to receive and the price it must pay for them. For an option with an exercise price of ₹100 on a share worth ₹130, intrinsic value is ₹30. It is used only in the rare case where fair value of the equity instruments cannot be estimated reliably.

Key rules to remember

Intrinsic value of an option: Intrinsic value = Fair value of share − Exercise price; Ind AS 102 uses this only in rare cases where the fair value of the equity instruments cannot be reliably estimated (paragraph 24). Changes are taken to profit or loss. Floor at zero if the option is out of the money.
Three types of transaction: Equity-settled | Cash-settled | Choice of settlement; Classify first. Measurement and journal entries depend on the type.
Fair value under Ind AS 102: Measure fair value as per Ind AS 102, not Ind AS 113; Paragraph 6A: the Standard's use of fair value differs in some respects from Ind AS 113.
Cash-settled liability: Liability measured at fair value initially and at the end of each reporting period until settled; Paragraph 33 refers to an option pricing model and the extent of service rendered to date.
Choice of settlement given to counterparty: Compound instrument = Debt component + Equity component; Paragraph 35. For employees, measure the fair value of the compound instrument at the measurement date (paragraph 36).
Scope exclusion: Contracts within Ind AS 32 paras 8-10 or Ind AS 109 paras 2.4-2.7 are outside Ind AS 102; Paragraph 6.

How to solve Ind AS 102 Scope and Key Definitions questions

Use this order for any scope or definitions question, whether it is a theory answer or a short scenario.

1Read what the company receives (goods or services) and how it pays (shares, options, cash based on share price).
2Check scope. If the contract falls under Ind AS 32 paragraphs 8 to 10 or Ind AS 109 paragraphs 2.4 to 2.7, Ind AS 102 does not apply.
3Classify the transaction as equity-settled, cash-settled or choice of settlement. For a choice, note who holds the choice.
4Fix the grant date: the date of shared understanding of the terms. Do not use the date the board first discusses the plan.
5List the vesting conditions and work out the vesting period from grant date to the date all conditions are met.
6State the measurement basis: fair value as per Ind AS 102 (not Ind AS 113); intrinsic value only in the rare case where fair value cannot be estimated reliably.
7Conclude with a short statement of the treatment and, if asked, the expense for the period.

Quickest way: Classify, date, period: the three-line check

When to use it: Use it in MCQs and in the first lines of a written answer when time is short.

Line 1: Who settles and in what? Own shares means equity-settled. Cash linked to share price means cash-settled. Choice means check who chooses.
Line 2: Mark the grant date as the date the terms are agreed and understood by both sides.
Line 3: Vesting period runs from grant date until all vesting conditions are met. Then pick the measurement basis: fair value, or intrinsic value in the rare case.

Common mistakes in Ind AS 102 Scope and Key Definitions

Treating a cash payment linked to share price as outside Ind AS 102.
Students think the Standard is only about issuing shares.
Fix: Remember the three types. Share appreciation rights paid in cash are cash-settled and are within the Standard.
Applying Ind AS 113 to measure fair value of options.
The words 'fair value' look the same in both Standards.
Fix: Paragraph 6A says fair value here is measured as per Ind AS 102, not Ind AS 113.
Taking the grant date as the date the board approves the plan.
Approval feels like the start of the arrangement.
Fix: Grant date needs a shared understanding of the terms with the counterparty. Check whether the employees have been told the terms and accepted.
Using intrinsic value as the normal measurement basis.
Intrinsic value is simple to compute, so it feels like the default.
Fix: Intrinsic value applies only in rare cases where fair value of the equity instruments cannot be estimated reliably (paragraph 24).
Confusing vesting period with the option's life.
Both are periods starting at grant.
Fix: Vesting period ends when the conditions are met. The option life continues to the end of the exercise period, which can be longer.
Ignoring the exclusion for contracts under Ind AS 32 or Ind AS 109.
Students focus on the types of transaction and skip the scope test.
Fix: Always do the scope check first, as in paragraph 6.

Worked examples

Example 1

Rohini Textiles Ltd offered 1,000 share options each to 50 senior managers. The managers were told the terms on 1 April 2026 and accepted them in writing the same day. The options vest on 31 March 2029 if the manager is still employed. Each option, when exercised, gives one equity share on payment of ₹100. Identify the type of transaction, the grant date and the vesting period. Also state the intrinsic value per option on 31 March 2029 if the share is then worth ₹135.

Show the solution

Type: the company pays for employee services with its own share options, so the transaction is equity-settled.
Grant date: 1 April 2026, because both sides understood and agreed the terms on that date.
Vesting condition: continued employment until 31 March 2029, a service condition.
Vesting period: 1 April 2026 to 31 March 2029, which is three years.
Intrinsic value per option = Fair value of share − Exercise price = ₹135 − ₹100 = ₹35.
Note: intrinsic value is the measurement basis only if fair value of the options cannot be reliably estimated, which is rare. Normally the grant date fair value is used.

Answer: Equity-settled; grant date 1 April 2026; vesting period three years ending 31 March 2029; intrinsic value ₹35 per option at that date.

Example 2

Kaveri Infra Ltd grants its CFO the right to receive, after two years of service, either 2,000 equity shares or cash equal to the value of 2,000 shares. The CFO chooses at the end of the two years. (a) How is this classified? (b) Which paragraph deals with measurement of the instrument for an employee? (c) Does Ind AS 113 govern the fair value measurement?

Show the solution

The CFO, the counterparty, has the right to choose cash or equity.
Under paragraph 35, when the counterparty chooses, the entity has granted a compound financial instrument.
The instrument has a debt component (the right to demand cash) and an equity component (the right to demand equity instead of cash).
For transactions with employees, paragraph 36 requires fair value of the compound instrument at the measurement date, considering the terms on which the rights to cash or equity were granted.
Paragraph 6A states that fair value is measured in accordance with Ind AS 102, not Ind AS 113.

Answer: (a) A choice-of-settlement transaction where the counterparty chooses, so a compound financial instrument with debt and equity components. (b) Paragraph 36. (c) No; fair value is measured under Ind AS 102 as per paragraph 6A.

Exam tips

Expect MCQs that ask you to match a scenario to equity-settled, cash-settled or choice of settlement. Practise spotting the settlement form quickly.
In case scenarios, find the grant date from the wording about when terms were communicated and accepted, not when the plan was approved.
Quote the paragraph number only when you are sure of it. Paragraph 6A on fair value and paragraph 24 on intrinsic value are safe to cite.
Write definitions in your own words in one line each, then apply them to the numbers in the question.
This topic is the base for the equity-settled and cash-settled topics. A wrong classification here carries forward into the journal entries.

Practice questions from Share based Payment (Ind AS 102)

Ind AS 102 Scope and Key Definitions: frequently asked questions

What is 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 with cash based on the price of its shares. Employee stock options are the common example. The entity must recognise the cost of what it receives.

What are the types of share-based payment transactions?

There are equity-settled, cash-settled and choice-of-settlement transactions. In a choice arrangement, whoever holds the choice decides the accounting. If the counterparty can choose, the entity has granted a compound financial instrument.

What is grant date and why does it matter?

Grant date is when the entity and the counterparty reach a shared understanding of the terms of the arrangement. For equity-settled awards to employees, fair value is normally fixed at this date. A wrong grant date leads to a wrong measurement.

When is intrinsic value used instead of fair value?

Only in rare cases where the entity cannot reliably estimate the fair value of the equity instruments granted. Then changes in intrinsic value are recognised in profit or loss until final settlement. In normal cases you use fair value.