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

Subsidiary Kaveri Pharma Ltd receives services from its employees. Its parent, Himalaya Holdings Ltd, grants the employees rights to shares of Himalaya Holdings itself and settles the award in its own equity instruments. Another subsidiary, Narmada Foods Ltd, instead settles a similar award for its own employees by paying cash. How should the settling entities classify the transactions under Ind AS 102 para 43C?

Himalaya Holdings classifies its award as equity-settled because it settles in its own equity instruments, while Narmada Foods classifies its award as cash-settled because it does not settle in its own equity instruments. Paragraph 43C makes classification depend on how the settling entity settles.

  1. ABoth settling entities recognise equity-settled transactions, as the receiving entity is in the same group
  2. BHimalaya Holdings recognises an equity-settled transaction as it settles in its own equity instruments; Narmada Foods recognises a cash-settled transaction as it settles otherwiseCorrect
  3. CHimalaya Holdings recognises a cash-settled transaction because it is not the entity receiving the services; Narmada Foods recognises an equity-settled transaction
  4. DBoth settling entities recognise cash-settled transactions because the receiving entity is a different legal entity

Explanation

Under para 43C, the entity settling the transaction when another group entity receives the services recognises it as equity-settled only if settled in its own equity instruments. Otherwise it is cash-settled. Himalaya settles in its own shares so equity-settled; Narmada pays cash so cash-settled.

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