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

Kaveri Pharma Ltd (the parent) will settle in cash a share-based payment under which employees of its subsidiary, Kaveri Labs Ltd, provide services. The parent pays cash linked to the value of the parent's shares. In the parent's books, as the settling entity, what is the correct classification under Ind AS 102?

It is a cash-settled share-based payment in the parent's books. The settling entity can treat a group transaction as equity-settled only when settlement is in its own equity instruments, and cash settlement, even if linked to share price, does not meet that condition.

  1. AEquity-settled, because the cash is linked to the parent's share price
  2. BEquity-settled, because the parent is the ultimate holding entity
  3. CCash-settled, because the transaction is not settled in the settling entity's own equity instrumentsCorrect
  4. DNot classified, because the subsidiary receives the services

Explanation

Under paragraph 43C, the settling entity recognises equity-settled treatment only if settlement is in its own equity instruments. Otherwise it is cash-settled. Settlement here is in cash, so the cash-settled treatment applies. The share-price link does not make it equity-settled.

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