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Commission Regulation (EC) No 211/2005 of 4 February
2005 amending Regulation (EC) No 1725/2003 adopting
certain international accounting standards in accordance
with Regulation (EC) No 1606/2002 of the European
Parliament and of the Council as regards International
Financial Reporting Standards (IFRS) 1 and 2 and
International Accounting Standards (IASs) No 12, 16, 19,
32, 33, 38 and 39
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Equity-settled share-based payment transactions
Overview
10. For equity-settled share-based payment transactions,
the entity shall measure the goods or services received, and
the corresponding increase in equity, directly, at the fair
value of the goods or services received, unless that fair
value cannot be estimated reliably. If the entity cannot
estimate reliably the fair value of the goods or services
received, the entity shall measure their value, and the
corresponding increase in equity, indirectly, by reference
to the fair value of the (*) equity instruments granted.
11. To apply the requirements of paragraph 10 to transactions
with employees and others providing similar services (**),
the entity shall measure the fair value of the services
received by reference to the fair value of the equity
instruments granted, because typically it is not possible to
estimate reliably the fair value of the services received,
as explained in paragraph 12. The fair value of those equity
instruments shall be measured at grant date.
12. Typically, shares, share options or other equity
instruments are granted to employees as part of their
remuneration package, in addition to a cash salary and other
employment benefits. Usually, it is not possible to measure
directly the services received for particular components of
the employee’s remuneration package. It might also not be
possible to measure the fair value of the total remuneration
package independently, without measuring directly the fair
value of the equity instruments granted. Furthermore, shares
or share options are sometimes granted as part of a bonus
arrangement, rather than as a part of basic remuneration, eg
as an incentive to the employees to remain in the entity’s
employ or to reward them for their efforts in improving the
entity’s performance. By granting shares or share options,
in addition to other remuneration, the entity is paying
additional remuneration to obtain additional benefits.
Estimating the fair value of those additional benefits is
likely to be difficult. Because of the difficulty of
measuring directly the fair value of the services received,
the entity shall measure the fair value of the employee
services received by reference to the fair value of the
equity instruments granted.
13. To apply the requirements of paragraph 10 to transactions
with parties other than employees, there shall be a
rebuttable presumption that the fair value of the goods or
services received can be estimated reliably. That fair value
shall be measured at the date the entity obtains the goods
or the counterparty renders service. In rare cases, if the
entity rebuts this presumption because it cannot estimate
reliably the fair value of the goods or services received,
the entity shall measure the goods or services received, and
the corresponding increase in equity, indirectly, by
reference to the fair value of the equity instruments
granted, measured at the date the entity obtains the goods
or the counterparty renders service.
Transactions in which services are
received
14. If the equity instruments granted vest immediately, the
counterparty is not required to complete a specified period
of service before becoming unconditionally entitled to those
equity instruments. In the absence of evidence to the
contrary, the entity shall presume that services rendered by
the counterparty as consideration for the equity instruments
have been received. In this case, on grant date the entity
shall recognise the services received in full, with a
corresponding increase in equity.
15. If the equity instruments granted do not vest until the
counterparty completes a specified period of service, the
entity shall presume that the services to be rendered by the
counterparty as consideration for those equity instruments
will be received in the future, during the vesting period.
The entity shall account for those services as they are
rendered by the counterparty during the vesting period, with
a corresponding increase in equity. For example:
(a) if an
employee is granted share options conditional upon
completing three years’ service, then the entity shall
presume that the services to be rendered by the employee
as consideration for the share options will be received
in the future, over that three-year vesting period.
(b) if an
employee is granted share options conditional upon the
achievement of a performance condition and remaining in
the entity’s employ until that performance condition is
satisfied, and the length of the vesting period varies
depending on when that performance condition is
satisfied, the entity shall presume that the services to
be rendered by the employee as consideration for the
share options will be received in the future, over the
expected vesting period. The entity shall estimate the
length of the expected vesting period at grant date,
based on the most likely outcome of the performance
condition. If the performance condition is a market
condition, the estimate of the length of the expected
vesting period shall be consistent with the assumptions
used in estimating the fair value of the options granted,
and shall not be subsequently revised. If the
performance condition is not a market condition, the
entity shall revise its estimate of the length of the
vesting period, if necessary, if subsequent information
indicates that the length of the vesting period differs
from previous estimates.
Transactions measured by reference to the fair value of the
equity instruments granted
Determining the fair value of equity instruments
granted
16. For transactions measured by reference to the fair value
of the equity instruments granted, an entity shall measure
the fair value of equity instruments granted at the
measurement date, based on market prices if available,
taking into account the terms and conditions upon which
those equity instruments were granted (subject to the
requirements of paragraphs 19–22).
17. If market prices are not available, the entity shall
estimate the fair value of the equity instruments granted
using a valuation technique to estimate what the price of
those equity instruments would have been on the measurement
date in an arm’s length transaction between knowledgeable,
willing parties. The valuation technique shall be consistent
with generally accepted valuation methodologies for pricing
financial instruments, and shall incorporate all factors and
assumptions that knowledgeable, willing market participants
would consider in setting the price (subject to the
requirements of paragraphs 19–22).
18. Appendix B contains further guidance on the measurement of
the fair value of shares and share options, focusing on the
specific terms and conditions that are common features of a
grant of shares or share options to employees.
(*) This IFRS uses the phrase «by reference to»
rather than «at», because the transaction is ultimately
measured by multiplying the fair value of the equity
instruments granted, measured at the date specified in
paragraph 11 or 13 (whichever is applicable), by the number
of equity instruments that vest, as explained in paragraph
19.
(**) In the remainder of this IFRS, all
references to employees also includes others providing
similar services.
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