|
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
Content |
|
- |
Modifications to the terms and
conditions on which equity instruments were granted,
including cancellations and settlements
26. An entity
might modify the terms and conditions on which the equity
instruments were granted. For example, it might reduce the
exercise price of options granted to employees (ie reprice
the options), which increases the fair value of those
options. The requirements in paragraphs 27–29 to account for
the effects of modifications are expressed in the context of
share-based payment transactions with employees. However,
the requirements shall also be applied to share-based
payment transactions with parties other than employees that
are measured by reference to the fair value of the equity
instruments granted. In the latter case, any references in
paragraphs 27–29 to grant date shall instead refer to the
date the entity obtains the goods or the counterparty
renders service.
27. The entity
shall recognise, as a minimum, the services received
measured at the grant date fair value of the equity
instruments granted, unless those equity instruments do not
vest because of failure to satisfy a vesting condition (other
than a market condition) that was specified at grant date.
This applies irrespective of any modifications to the terms
and conditions on which the equity instruments were granted,
or a cancellation or settlement of that grant of equity
instruments. In addition, the entity shall recognise the
effects of modifications that increase the total fair value
of the sharebased payment arrangement or are otherwise
beneficial to the employee. Guidance on applying this
requirement is given in Appendix B.
28. If the entity
cancels or settles a grant of equity instruments during the
vesting period (other than a grant cancelled by forfeiture
when the vesting conditions are not satisfied):
(a) the entity
shall account for the cancellation or settlement as an
acceleration of vesting, and shall therefore recognise
immediately the amount that otherwise would have been
recognised for services received over the remainder of
the vesting period.
(b) any
payment made to the employee on the cancellation or
settlement of the grant shall be accounted for as the
repurchase of an equity interest, ie as a deduction from
equity, except to the extent that the payment exceeds
the fair value of the equity instruments granted,
measured at the repurchase date. Any such excess shall
be recognised as an expense.
(c) if new
equity instruments are granted to the employee and, on
the date when those new equity instruments are granted,
the entity identifies the new equity instruments granted
as replacement equity instruments for the cancelled
equity instruments, the entity shall account for the
granting of replacement equity instruments in the same
way as a modification of the original grant of equity
instruments, in accordance with paragraph 27 and the
guidance in Appendix B. The incremental fair value
granted is the difference between the fair value of the
replacement equity instruments and the net fair value of
the cancelled equity instruments, at the date the
replacement equity instruments are granted. The net fair
value of the cancelled equity instruments is their fair
value, immediately before the cancellation, less the
amount of any payment made to the employee on
cancellation of the equity instruments that is accounted
for as a deduction from equity in accordance with (b)
above. If the entity does not identify new equity
instruments granted as replacement equity instruments
for the cancelled equity instruments, the entity shall
account for those new equity instruments as a new grant
of equity instruments.
29. If an entity
repurchases vested equity instruments, the payment made to
the employee shall be accounted for as a deduction from
equity, except to the extent that the payment exceeds the
fair value of the equity instruments repurchased, measured
at the repurchase date. Any such excess shall be recognised
as an expense.
Cash-settled share-based payment
transactions
30. For
cash-settled share-based payment transactions, the entity
shall measure the goods or services acquired and the
liability incurred at the fair value of the liability. Until
the liability is settled, the entity shall remeasure the
fair value of the liability at each reporting date and at
the date of settlement, with any changes in fair value
recognised in profit or loss for the period.
31. 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 (eg
upon cessation of employment) or at the employee’s option.
32. The entity
shall recognise the services received, and a liability to
pay for those services, as the employees render service. For
example, some share appreciation rights vest immediately,
and the employees are therefore not required to complete a
specified period of service to become entitled to the cash
payment. In the absence of evidence to the contrary, the
entity shall presume that the services rendered by the
employees in exchange for the share appreciation rights have
been received. Thus, the entity shall recognise immediately
the services received and a liability to pay for them. If
the share appreciation rights do not vest until the
employees have completed a specified period of service, the
entity shall recognise the services received, and a
liability to pay for them, as the employees render service
during that period.
33. The liability
shall be measured, initially and at each reporting date
until settled, at the fair value of the share appreciation
rights, by applying an option pricing model, taking into
account the terms and conditions on which the share
appreciation rights were granted, and the extent to which
the employees have rendered service to date.
Share-based payment transactions with cash alternatives
34. For
share-based payment transactions in which the terms of the
arrangement provide either the entity or the counterparty
with the choice of whether the entity settles the
transaction in cash (or other assets) or by issuing
equity instruments, the entity shall account for that
transaction, or the components of that transaction, as a
cash-settled share-based payment transaction if, and to the
extent that, the entity has incurred a liability to settle
in cash or other assets, or as an equity-settled share-based
payment transaction if, and to the extent that, no such
liability has been incurred.
Share-based payment transactions in which the terms of the
arrangement provide the counterparty with a choice of
settlement
35. If an entity
has granted the counterparty the right to choose whether a
share-based payment transaction is settled in cash (*) or by
issuing equity instruments, the entity has granted a
compound financial instrument, which includes a debt
component (ie the counterparty’s right to demand payment in
cash) and an equity component (ie the counterparty’s right
to demand settlement in equity instruments rather than in
cash). For transactions with parties other than employees,
in which the fair value of the goods or services received is
measured directly, the entity shall measure the equity
component of the compound financial instrument as the
difference between the fair value of the goods or services
received and the fair value of the debt component, at the
date when the goods or services are received.
36. For other
transactions, including transactions with employees, the
entity shall measure the fair value of the compound
financial instrument at the measurement date, taking into
account the terms and conditions on which the rights to cash
or equity instruments were granted.
37. To apply
paragraph 36, the entity shall first measure the fair value
of the debt component, and then measure the fair value of
the equity component — taking into account that the
counterparty must forfeit the right to receive cash in order
to receive the equity instrument. The fair value of the
compound financial instrument is the sum of the fair values
of the two components. However, share-based payment
transactions in which the counterparty has the choice of
settlement are often structured so that the fair value of
one settlement alternative is the same as the other. For
example, the counterparty might have the choice of receiving
share options or cash-settled share appreciation rights. In
such cases, the fair value of the equity component is zero,
and hence the fair value of the compound financial
instrument is the same as the fair value of the debt
component. Conversely, if the fair values of the settlement
alternatives differ, the fair value of the equity component
usually will be greater than zero, in which case the fair
value of the compound financial instrument will be greater
than the fair value of the debt component.
38. The entity
shall account separately for the goods or services received
or acquired in respect of each component of the compound
financial instrument. For the debt component, the entity
shall recognise the goods or services acquired, and a
liability to pay for those goods or services, as the
counterparty supplies goods or renders service, in
accordance with the requirements applying to cash-settled
share-based payment transactions (paragraphs 30–33). For the
equity component (if any), the entity shall recognise the
goods or services received, and an increase in equity, as
the counterparty supplies goods or renders service, in
accordance with the requirements applying to equity-settled
share-based payment transactions (paragraphs 10–29).
39. At the date of
settlement, the entity shall remeasure the liability to its
fair value. If the entity issues equity instruments on
settlement rather than paying cash, the liability shall be
transferred direct to equity, as the consideration for the
equity instruments issued.
40. If the entity
pays in cash on settlement rather than issuing equity
instruments, that payment shall be applied to settle the
liability in full. Any equity component previously
recognised shall remain within equity. By electing to
receive cash on settlement, the counterparty forfeited the
right to receive equity instruments. However, this
requirement does not preclude the entity from recognising a
transfer within equity, ie a transfer from one component of
equity to another.
Share-based
payment transactions in which the terms of the arrangement
provide the entity with a choice of settlement
41. For a
share-based payment transaction in which the terms of the
arrangement provide an entity with the choice of whether to
settle in cash or by issuing equity instruments, the entity
shall determine whether it has a present obligation to
settle in cash and account for the share-based payment
transaction accordingly. The entity has a present obligation
to settle in cash if the choice of settlement in equity
instruments has no commercial substance (eg because the
entity is legally prohibited from issuing shares), or the
entity has a past practice or a stated policy of settling in
cash, or generally settles in cash whenever the counterparty
asks for cash settlement.
42. If the entity
has a present obligation to settle in cash, it shall account
for the transaction in accordance with the requirements
applying to cash-settled share-based payment transactions,
in paragraphs 30–33.
43. If no such
obligation exists, the entity shall account for the
transaction in accordance with the requirements applying to
equity-settled share-based payment transactions, in
paragraphs 10–29. Upon settlement:
(a) if the
entity elects to settle in cash, the cash payment shall
be accounted for as the repurchase of an equity interest,
ie as a deduction from equity, except as noted in (c)
below.
(b) if the
entity elects to settle by issuing equity instruments,
no further accounting is required (other than a transfer
from one component of equity to another, if necessary),
except as noted in (c) below.
(c) if the
entity elects the settlement alternative with the higher
fair value, as at the date of settlement, the entity
shall recognise an additional expense for the excess
value given, ie the difference between the cash paid and
the fair value of the equity instruments that would
otherwise have been issued, or the difference between
the fair value of the equity instruments issued and the
amount of cash that would otherwise have been paid,
whichever is applicable.
(*) In paragraphs 35-43, all references to cash also
include other assets of the entity.
Previous |
Index |
Next
|
