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

On 1 January 20X1 Marlow Co granted 100 share appreciation rights (SARs) to each of its 200 employees, payable in cash after a three-year service period. Which statement correctly describes how Marlow Co measures the liability for this cash-settled share-based payment under IFRS 2?

The liability is measured at the fair value of the SARs at each reporting date and at settlement, with all changes recognised in profit or loss. The fixed grant-date measurement and equity credit apply only to equity-settled awards, not cash-settled ones.

  1. AAt the grant-date fair value, fixed and never remeasured, spread over the vesting period
  2. BAt the fair value of the SARs at each reporting date, with changes recognised in profit or loss, until settlementCorrect
  3. CAt the intrinsic value at each reporting date, with changes recognised in other comprehensive income
  4. DAt the grant-date fair value, with the credit recognised directly in equity

Explanation

IFRS 2 requires a cash-settled transaction to be measured at the fair value of the liability, remeasured at each reporting date and at settlement. Changes in fair value go to profit or loss. The grant-date fixed measurement with an equity credit applies to equity-settled schemes.

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