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

Ananya Textiles Ltd's parent, Rao Holdings Ltd, agrees to pay cash to Ananya's employees based on the value of the parent's shares, in return for services Ananya receives. Rao Holdings settles the obligation in cash. Under Ind AS 102, how must Rao Holdings, the settling entity, classify the transaction in its own financial statements?

It is cash-settled. Under paragraph 43C, the settling entity treats a group share-based payment as equity-settled only when it settles in its own equity instruments. Settlement in cash fails that test, so Rao Holdings recognises it as cash-settled.

  1. AEquity-settled, because the cash amount is linked to the parent's share price
  2. BCash-settled, because it is not settled in the settling entity's own equity instrumentsCorrect
  3. CEquity-settled, because the employees belong to a group entity
  4. DCash-settled only if the subsidiary also records it as cash-settled

Explanation

Paragraph 43C says that the settling entity recognises an equity-settled transaction only if it settles in its own equity instruments. Settlement in cash means the condition is not met, so the transaction is recognised as cash-settled. Linking the cash amount to the share price does not change this.

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