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

Echo Co grants share options to employees on 1 January 20X1 with a grant-date fair value of $5 per option. At 31 December 20X1 the fair value is $7. The options vest after three years of service. How should Echo measure the services received from employees under IFRS 2?

Echo measures the cost at the grant-date fair value of the options, which is $5, and does not remeasure it afterwards. Equity-settled awards are fixed at grant date because the credit goes to equity; only cash-settled awards are remeasured at each reporting date.

  1. ABy reference to the fair value of the options at grant date, not remeasured laterCorrect
  2. BBy reference to the fair value of the options at each reporting date, with remeasurement
  3. CBy reference to the intrinsic value of the options at vesting date
  4. DBy reference to the fair value of the options at the date the employees exercise them

Explanation

For equity-settled transactions with employees, IFRS 2 measures the transaction at the fair value of the equity instruments at grant date. The amount is not remeasured for later fair value changes because the credit is in equity. Remeasurement at each reporting date applies to cash-settled transactions.

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