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[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off”][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”http://www.frs102.com/members/premium-toolkit/” type=”big” color=”red”] Return to Main Index[/button] [/et_pb_text][/et_pb_column][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”http://frs102.com/members/premium-toolkit/section-26/” type=”big” color=”red”] Return to Section 26 Home[/button] [/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Main Body Text” background_layout=”light” text_orientation=”justified” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]Section 26: Share-based Payment
Scope of this section Extract from FRS102: Section 26.1 – 26.2.
Section 26 specifies the accounting for all share-based payment transactions including:
(a) equity-settled share-based payment transactions, in which the entity:
(i) receives goods or services as consideration for its own equity instruments (including shares or share options); or
(ii) receives goods or services but has no obligation to settle the transaction with the supplier;
(b) cash-settled share-based payment transactions, in which the entity acquires goods or services by incurring a liability to transfer cash or other assets to the supplier of those goods or services for amounts that are based on the price (or value) of the entity’s shares or other equity instruments of the entity or another group entity; and
(c) transactions in which the entity receives or acquires goods or services and the terms of the arrangement provide either the entity or the supplier of those goods or services with a choice of whether the entity settles the transaction in cash (or other assets) or by issuing equity instruments.
26.1A A share-based payment transaction may be settled by another group entity (or a shareholder of any group entity) on behalf of the entity receiving or acquiring the goods or services. Paragraph 26.1 also applies to an entity that:
(a) receives goods or services when another entity in the same group (or shareholder of any group entity) has the obligation to settle the share-based payment transaction; or
(b) has an obligation to settle a share-based payment transaction when another entity in the same group receives the goods or services unless the transaction is clearly for a purpose other than payment for goods or services supplied to the entity receiving them.
26.2 Cash-settled share-based payment transactions include share appreciation rights.
For example, an entity might grant share appreciation rights to employees as part of their remuneration package, whereby the employees will become entitled to a future cash payment (rather than an equity instrument), based on the increase in the entity’s share price from a specified level over a specified period of time. Or an entity might grant to its employees a right to receive a future cash payment by granting to them a right to shares (including shares to be issued upon the exercise of share options) that are redeemable, either mandatorily (e.g. upon cessation of employment) or at the employee’s option.
OmniPro comment Share based payment transactions are classified into three categories as follows:
- Equity settled share based payment transactions;
- Cash settled share based payment transactions; and
- Transactions with settlement alternatives.
Although not made clear above, (IFRS 2) makes it clear that goods (as per 26.1 (c) include the following:
- Inventories;
- Consumables;
- Property, plant and equipment;
- Intangibles; and
- Other financial assets.
Example 1: Shares issued for services rendered Mr X performed work for Company A upon completion of this work Company A will issue 100 shares in its itself to Mr X. This transaction comes within the scope of Section 26 as Mr X has received equity shares in return for services rendered.
Example 2: Shares issued in return for stock Mr X supplied inventory to Company A, and in return for this inventory Company A issued 500 shares in itself to Mr X. This transaction comes within the scope of Section 26. Note if in this instance, the entity could settle the liability net, i.e. using it as a hedging instrument, it would not come within the scope of Section 26.
Example 3: Share appreciation Company A entered into an agreement with some of its employees whereby they would pay a cash bonus if the share price increases, the value to be placed on the shares is based on EBITA. In this case it is unlikely this will come within the remit of Section 26 as this formula would not equate to fair value, instead this would be accounted for under Section 28.
Example 4: Share options Company A provides its employees with the option to purchase shares at a set rate in the future if the employees stay with the company for 3 years. This will be accounted for under Section 26.
Example 5: Shares issued to employees as part of a business combination Company A acquired Company B and as part of the agreement, Company A issued share options in itself to those employees of Company B if they remain in service for three years. In this case the options come within the scope of Section 26
Example 6: Shares issued to the previous owner as part of a business combination Company A acquired Company B and in return for Mr X transferring ownership, Mr X was issued shares in Company A and a right to receive further shares in the future. This does not come within the remit of Section 26.
Example 7: Issuance of share rights/options in other group companies Company A entered into an arrangement with its employees whereby they had the option to subscribe for its parent company shares at a set price in the future. In this case, this comes within the remit of Section 26.
Example 8: Phantom share scheme Company A enters into an arrangement with employees where if the value per share increases by a certain amount over a period of time, the entity will pay the employee a bonus equivalent to that amount. This would be a cash settled share based payment, and hence would be accounted for under Section 26.
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