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

Parent Ltd grants its own equity shares options to employees of its wholly owned subsidiary Sub Ltd. Sub Ltd receives the services, and Parent Ltd will settle the award by issuing its own equity instruments. How should Parent Ltd classify the transaction in its own separate financial statements as per Ind AS 102?

Parent Ltd classifies it as an equity-settled share-based payment transaction. The settling entity treats a group award as equity-settled only if settled in its own equity instruments, and Parent Ltd will issue its own shares, even though the subsidiary receives the services.

  1. AAs a cash-settled share-based payment transaction because the services are received by another entity
  2. BAs an equity-settled share-based payment transaction because it is settled in its own equity instrumentsCorrect
  3. CAs a cash-settled transaction because the beneficiaries are not its own employees
  4. DAs outside the scope of Ind AS 102 because it is a group transaction

Explanation

Paragraph 43C says the entity settling a group share-based payment transaction, when another group entity receives the services, recognises it as equity-settled only if it is settled in the entity's own equity instruments. Parent Ltd settles in its own shares, so it is equity-settled. Otherwise it would be cash-settled.

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