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

Veda Pharma Ltd grants share options to employees of its wholly owned subsidiary, Veda Labs Ltd, which receives the employees' services. Veda Pharma settles the award by issuing its own equity shares to those employees. How should Veda Pharma classify the transaction in line with the group share-based payment provisions of Ind AS 102 (para 43C)?

The transaction is equity-settled. Under para 43C, the entity settling a group share-based payment recognises it as equity-settled only if it is settled in its own equity instruments, and Veda Pharma issues its own shares, so cash-settled treatment is not required.

  1. AAs a cash-settled share-based payment, because the services are received by another group entity
  2. BAs an equity-settled share-based payment, because it is settled in the settling entity's own equity instrumentsCorrect
  3. CAs a cash-settled transaction until the subsidiary reimburses the parent
  4. DAs a transaction outside Ind AS 102, because it is a group transaction

Explanation

Para 43C says the entity settling a transaction when another group entity receives the services recognises it as equity-settled only if settled in its own equity instruments. Veda Pharma settles by issuing its own shares, so equity-settled treatment applies. Treating it as cash-settled is wrong because that applies only when settlement is not in the entity's own equity instruments.

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