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

Zeta Co grants 100 share appreciation rights (SARs) to each of its 200 employees on 1 January 20X1. The SARs are settled in cash and vest after two years of service. Which statement correctly describes how Zeta Co should measure the liability at each reporting date under IFRS 2?

The liability is measured at fair value at each reporting date until settlement, accrued over the vesting period, with remeasurement changes recognised in profit or loss. Grant-date fair value without remeasurement is the equity-settled approach and does not apply to cash-settled awards.

  1. AAt the grant-date fair value of the SARs, never remeasured
  2. BAt the fair value of the SARs at each reporting date, recognised over the vesting period, with changes in fair value recognised in profit or lossCorrect
  3. CAt the intrinsic value at the settlement date only, with no accrual before that date
  4. DAt the grant-date fair value, with changes in fair value taken to other comprehensive income

Explanation

For cash-settled transactions IFRS 2 requires the liability to be measured at fair value, remeasured at each reporting date and at settlement. The expense is spread over the vesting period and fair value changes go to profit or loss. Grant-date measurement applies to equity-settled schemes, so the first option is wrong.

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