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

Parent P grants 100 of its own shares to each of 50 employees of its wholly owned subsidiary S, each employee requiring three years of service. P settles the award by issuing its own shares. Which statement correctly describes the accounting in S's separate financial statements under IFRS 2?

The subsidiary recognises an expense for the services received and credits equity as a capital contribution from the parent. Because the parent settles using its own equity instruments, the subsidiary treats the award as equity-settled, and it has no liability to deliver shares or cash.

  1. AS recognises an expense and a credit to equity as a capital contribution from P, because S receives the services but has no obligation to settleCorrect
  2. BS recognises an expense and a liability to P, because S receives the services
  3. CS recognises nothing, because P grants and settles the award
  4. DS recognises an expense only when P charges S for the shares

Explanation

S receives employee services, and the arrangement is settled by its parent in the parent's equity instruments, so S classifies it as equity-settled and recognises the expense with a credit to equity (a capital contribution). P records an increase in its investment in S with a credit to equity. S has no obligation to deliver anything.

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