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

Parent company Veda Industries Ltd grants its own equity shares as options to employees of its subsidiary, Veda Components Ltd. The subsidiary receives the services, and the parent settles the transaction by issuing the parent's own equity instruments. How should the entity settling the transaction (the parent) classify it in its own financial statements as per Ind AS 102?

The parent classifies it as an equity-settled share-based payment. Under Ind AS 102, the settling entity treats a group transaction as equity-settled only if settled in its own equity instruments, which the parent does here by issuing its own shares.

  1. ACash-settled share-based payment, since the services are received by another entity
  2. BEquity-settled share-based payment, since it is settled in the settling entity's own equity instrumentsCorrect
  3. CCash-settled, because group transactions are always cash-settled in the settling entity's books
  4. DNot recognised by the parent at all, since it receives no services

Explanation

Where another group entity receives goods or services, the entity settling the transaction recognises it as equity-settled only if settled in its own equity instruments. Veda Industries settles in its own shares, so it is equity-settled. The cash-settled option applies only where settlement is otherwise than in its own equity instruments.

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