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

Kaveri Pharma Ltd's subsidiary's employees receive services-linked benefits. The parent, Kaveri Pharma, settles the arrangement by paying cash equal to the value of its shares to the subsidiary's employees, while the subsidiary receives the services. How does the parent recognise the transaction as per Ind AS 102?

The parent recognises it as a cash-settled share-based payment. Ind AS 102 permits equity-settled treatment by the settling entity only when settlement is in its own equity instruments; payment in cash is otherwise cash-settled, regardless of share-value linkage.

  1. AEquity-settled, because the amount is linked to the value of the parent's shares
  2. BCash-settled, because it is not settled in the parent's own equity instrumentsCorrect
  3. CEquity-settled, because the subsidiary receives the services
  4. DCash-settled only if the subsidiary is wholly owned

Explanation

The settling entity recognises an equity-settled transaction only if settled in its own equity instruments. Otherwise it is recognised as cash-settled. Here settlement is in cash, so cash-settled treatment applies; linkage to share value does not make it equity-settled, and ownership percentage is irrelevant.

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