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Amendments Issued for Share-Based Payment Standard

The IASB amended its share-based payment guidance to clarify the accounting for some types of equity payments. The amendments had been approved by the IFRS Interpretations Committee.

The IASB on June 20, 2016, published Classification and Measurement of Share-Based Payment Transactions: Amendments to IFRS 2, to clarify the accounting for some types of equity payments.

The amendments become effective on January 1, 2018, although the IASB said it will allow them to be applied prior to the effective date.

The amendments to IFRS 2, Share-Based Payment , from the IASB’s IFRS Interpretations Committee explain the accounting for:

  • The effects of vesting conditions and other issues on the measurement of share-based payments that are settled in cash,
  • Equity payments that include a provision for withholding taxes when they are settled, and
  • Share-based payments that are modified and settled with options or other forms of equity instead of cash.

The guidance for measuring share-based payments settled in cash was amended in response to a request the board received about applying IFRS 2. The IASB said in paragraph 33D, which was added as a result of the amendments , that the goods and services received for the shares should be given a value equal to the cash paid to cover the stock award.

The tax withholding guidance has been amended to make clear that the entire payment to the employee should be classified as an equity award, and that the withheld taxes should be treated as a separate cash payment to the tax authorities, the IASB said. The accounting board said in the Basis for Conclusions section of the amendments that it understands that it established an exception to the normal requirements of IFRS 2, but it believes the exception is justified because it would be difficult to account for the equity payment as partially settled in equity and partially settled in cash.

“Dividing the transaction into two components requires an entity to estimate changes that affect the amount that the entity is required to withhold and remit to the tax authority on the employee’s behalf in respect of the share-based payment,” the IASB said. “As that estimate changes, the entity would need to reclassify a portion of the share-based payment between cash-settled and equity-settled.”

The amendments to the guidance for share payments that have been modified address some inconsistency in how IFRS 2 has been applied, the IASB said. It added that the share-based payment standard did not provide specific guidance for these situations.

The IASB said a cash-settled share payment that has been modified to an equity-settled payment should be derecognized and that the new equity-settled payment should be recognized in equity at the fair value of the goods or services received for it by the modification date.

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