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CMA Final · Corporate Financial Reporting · Share based Payment (Ind AS 102)

Parent Ltd grants its own equity shares to employees of its subsidiary Sub Ltd as a reward for services rendered to Sub Ltd. Sub Ltd receives the services, and Parent Ltd settles the transaction by issuing its own equity instruments. As per Ind AS 102, how should Parent Ltd recognise the transaction in its own books?

Parent Ltd recognises it as an equity-settled share-based payment, because under Ind AS 102 the settling entity treats a group transaction as equity-settled only when it is settled in its own equity instruments, which is the case here.

  1. AAs a cash-settled share-based payment
  2. BAs an equity-settled share-based payment, since it is settled in its own equity instrumentsCorrect
  3. CIt is not recognised by Parent Ltd as it is a group transaction
  4. DAs an equity-settled transaction only if Sub Ltd pays Parent Ltd in cash

Explanation

Ind AS 102 says the entity settling a group share-based payment, when another group entity receives the services, recognises it as equity-settled only if settled in its own equity instruments; otherwise as cash-settled. Parent settles with its own shares, so equity-settled. Cash-settled would apply only if settlement were in something other than its own equity.

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