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

Beta plc grants 200 employees share appreciation rights (SARs) entitling each to a cash payment equal to the increase in Beta's share price over three years. Which statement about the accounting treatment is correct under IFRS 2?

Share appreciation rights are cash-settled, so Beta recognises a liability over the vesting period and remeasures it at fair value at each reporting date until settlement, taking changes to profit or loss, rather than fixing the grant-date value in equity.

  1. AA liability is recognised and remeasured at fair value at each reporting date until settlement, with changes in profit or lossCorrect
  2. BThe fair value at grant date is fixed and credited to equity
  3. CNo entry is made until the cash is paid
  4. DThe liability is measured at intrinsic value only and not remeasured before settlement

Explanation

SARs are cash-settled. The services are recognised over the vesting period with a liability remeasured at fair value at each reporting date and at settlement, changes going to profit or loss. Fixing at grant date is the equity-settled approach and is wrong here.

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