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

Zenith plc grants 1,000 share options to each of its 50 managers, vesting after three years of service. Which description correctly classifies this transaction under IFRS 2?

This is an equity-settled share-based payment. Because employee services are hard to value directly, the entity measures the transaction at the grant-date fair value of the options granted, and does not remeasure that amount in later periods.

  1. AEquity-settled share-based payment with employees, measured at the grant-date fair value of the optionsCorrect
  2. BCash-settled share-based payment, remeasured to fair value at each reporting date
  3. CEquity-settled share-based payment, measured at the fair value of services received at each reporting date
  4. DA transaction outside IFRS 2 because the shares are not issued until vesting

Explanation

Where an entity receives services in exchange for its own equity instruments, it is equity-settled. For employees, the services cannot be reliably valued, so the grant-date fair value of the options is used and is not later remeasured. Cash-settled treatment applies only when the entity incurs a liability based on share price.

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