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ACCA Strategic Professional · Strategic Business Reporting (International) · Share-based payment

Alpha Ltd, a subsidiary of Omega plc, receives services from its employees. Omega, the parent, grants its own shares to those employees as reward, and Alpha has no obligation to settle. How does IFRS 2 apply in Alpha's separate financial statements?

Alpha recognises an expense for the employee services received over the vesting period, with a credit to equity, treating it as equity-settled because it has no obligation to settle. IFRS 2 applies to group arrangements even when the parent delivers the shares.

  1. AAlpha recognises the services received as an expense with a corresponding credit to equity, as an equity-settled transactionCorrect
  2. BAlpha recognises nothing because Omega settles the award
  3. CAlpha recognises a liability to Omega for the fair value of the shares
  4. DAlpha recognises the expense only when the employees exercise the options

Explanation

IFRS 2 covers group share-based payments. The receiving entity measures the services as equity-settled when it has no obligation to settle, with the credit to equity (a capital contribution from the parent). Recognition is over the vesting period, not on exercise, and no liability arises.

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