share-based payment. lacpa- ifrs 2 july 5, 2006 roger nasr
Post on 18-Dec-2015
223 Views
Preview:
TRANSCRIPT
Share-Based Payment.
LACPA- IFRS 2July 5, 2006 Roger Nasr
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Agenda
• Overview of IFRS 2– Scope and Definition
– Recognition
– Measurement
– Vesting Conditions
– Valuation
• Case studies– Grant date
– Graded vesting
– Market conditions
Overview
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
• Scope exclusions– Issuance of shares in a business combination (IAS 22)
– Share based payments in the scope of IAS 32 & 39
– Share based payments other than for goods or services
• Definition
–Transaction in which an entity receives or acquires goods or services in exchange for:
– Equity instruments OR
– Based on the price of equity instruments
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Types
–Equity settled
–Cash settled
–Choice between the two alternatives
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Share based payments
Goods or servicesEquity instruments/
Liabilities (linked to share price)
Asset Expense Equity Liability
New – IFRS 2Share based payments
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Equity settled
Fair value grant day only
No changes in fair value
Cash settled
Fair value each balance sheet
date
Changes in fair value in P&L until
exercise
With cash alternative
Equity component(measure at grant date only)
Cash component(Measure at each balance
sheet)
Changes if fair value follow split
New – IFRS 2Overview of recognition
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Equity settled
Employees or similar Other than employees
Fair value grant date only
Value goods or services at date received
Expense allocated over vesting period
Expense recognised as goods or services are used
New – IFRS 2Equity settled payments
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
• Vesting conditions means that the employee does not get the right to exercise options, unless certain conditions are met
• Two types of vesting conditions– Market based
– Achieve a target share price or share price relative to an index
– Non-market based
– Employment
– Accounting key figures (e.g. EPS, revenue targets)
– Personal targets
– IPO of the company
– Sale of the company
Vesting conditions
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
1. Non-market basedvesting condition
Fair value excludes vesting conditions
True-upAdjust number of shares or
vesting date for actual results
2. Market based vesting condition
Fair value includes these vesting conditions
No true-upDo not adjust number of
shares or vesting date for actual results
• Issuance of fully vested shares• relates to past service therefore expensed immediately
• Issuance of shares with a vesting period• relates to services over vesting period: expense over vesting
period
• Two types of vesting conditions:`
OR
Vesting Conditions
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
New – IFRS 2Valuation models
Black-Scholes method Binomial method
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Example
500
100 options each that vest if employed in 3 years
Fair value per option = $15
Total grant date value?
Adjust expense for actual vested shares since there is a non-market vesting condition
$750,000 (=500x100x15) $250 each year
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Example (continued)
$200,000
Year 1
$200,000
Year 2
$200,000
Year 3
$600,000 total expense over three years (50,000 options x 80%) x $15
If 80% are expected to vest (and does vest)
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Example (continued)
$212,500
Year 1
(250 x 0.85)
$227,500
Year 2
(500 x 0.88 - 212.5)
$224,500
Year 3
(750 x 0.886 - (212.5 + 227.5))
Total expense = $664,500 ($15 x 44,300)
IFAt the end of year 1: expect 85% of options to vestAt the end of year 2: expect 88% of options to vest
At the end of year 3: 44,300 shares (or 88.6%) actually vest
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Example (continued)
- $400,000
Year 3
- (250 x 0.8) x 2
$0 total expense reduced to zero because no options vest
All employees resign during period 3 without receiving options
(or another non-market vesting condition is not met)
$200,000
Year 1
(250 x 0.8)
$200,000
Year 2
(250 x 0.8)
Case studies
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
• Accounting for a grant of options with graded vesting conditions– What expense is recognised in year 2 and why?
Case study 1
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
• Grant date– Why is the determination of grant date important? How does grant
date impact the period over which any expense relating to a share-based payment is recognised? (discussion)
– What is the grant date for the share options?
– Over what period should the expense in relation to the share options be recognised?
– Does this have any impact on the determination of the fair value of the share options granted?
Case study 2
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
• Definitions of market conditions– Determine whether the vesting conditions for the share-based
payment transaction of Lamentana and Benson should be considered a market condition or a non-market condition
Case study 3
IFRS 2 Share-Based Payment © 2006 Deloitte - Roger Nasr
Questions
top related