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

Orion Engineering Ltd's holding company settles, in cash, a share-based award given to employees of Orion Engineering, which receives the services. The holding company is the settling entity. How must the holding company classify the transaction in its own financial statements?

The holding company classifies it as a cash-settled share-based payment. When a group entity receives the services, the settling entity treats the transaction as equity-settled only if settled in its own equity instruments; settlement in cash fails that test.

  1. AEquity-settled, because the award is based on shares of the group
  2. BEquity-settled, because the employees belong to a group entity
  3. CCash-settled, because it is not settled in the settling entity's own equity instrumentsCorrect
  4. DNot recognised until the cash is actually paid

Explanation

Under paragraph 43C, the settling entity recognises an equity-settled transaction only if settled in its own equity instruments. Otherwise it is recognised as cash-settled. Settlement here is in cash, so cash-settled treatment applies; the share basis of the award (option A) is irrelevant.

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