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

Rohan Textiles Ltd is the parent of Rohan Weaves Ltd. Employees of Rohan Weaves are promised awards that Rohan Weaves will settle by delivering shares of Rohan Textiles, the parent. How should Rohan Weaves classify this transaction in its own financial statements under Ind AS 102?

Rohan Weaves classifies the award as cash-settled. Under Ind AS 102, a settling group entity treats the transaction as equity-settled only when it settles in its own equity instruments. Delivering the parent's shares does not meet that test, so the cash-settled model applies.

  1. AEquity-settled, because shares are being delivered
  2. BEquity-settled, because the group is the ultimate issuer of the shares
  3. CCash-settled, because settlement is not in Rohan Weaves' own equity instrumentsCorrect
  4. DNot recognised by Rohan Weaves, because the parent bears the cost

Explanation

The entity settling a group share-based payment recognises it as equity-settled only if it is settled in that entity's own equity instruments. Rohan Weaves settles in the parent's shares, which are not its own equity instruments. It therefore recognises a cash-settled transaction. The first option fails because delivering shares is not enough; the shares must be the settling entity's own.

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