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CA Final · Financial Reporting · Ind AS 102 Share Based Payment

Kaveri Holdings Ltd (parent) grants its own equity shares to employees of its wholly owned subsidiary, Kaveri Retail Ltd, as reward for services rendered to the subsidiary. Kaveri Holdings settles the transaction by issuing its own equity instruments. How should Kaveri Holdings, as the settling entity, recognise the transaction in line with Ind AS 102 on group share-based payments?

Kaveri Holdings should recognise it as an equity-settled share-based payment. The settling entity treats the transaction as equity-settled only if it settles in its own equity instruments, which the parent does here by issuing its own shares, even though the subsidiary receives the services.

  1. AAs a cash-settled share-based payment transaction, since the services are received by another entity
  2. BAs an equity-settled share-based payment transaction, because it is settled in the entity's own equity instrumentsCorrect
  3. CAs an equity-settled transaction only if the subsidiary also issues its own shares
  4. DIt is not a share-based payment for the parent and is ignored

Explanation

Paragraph 43C says the entity settling a transaction when another group entity receives the services recognises it as equity-settled only if settled in the entity's own equity instruments. Kaveri Holdings settles in its own shares, so equity-settled treatment applies. Option A would apply only if settlement were not in its own equity instruments.

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