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The IASB decided not to propose an amendment to IFRS 2 for this issue

 30 April 2014


The IASB met on 25 April 2014 to continue its deliberations on proposed amendments to IFRS 2 Share-based Payment. Those amendments had been recommended to the IASB by the Interpretations Committee. In this meeting, the IASB discussed:

  1. the accounting for a share-based payment in which the manner of settlement is contingent on future events;
  2. the accounting for a modification of a share-based payment from cash-settled to equity-settled; and
  3. the transition requirements for the narrow-scope amendments to IFRS 2.

Accounting for a share-based payment in which the manner of settlement is contingent on future events

The IASB discussed an approach that had been recommended by the Interpretations Committee for providing guidance for the classification of share-based payments in which the manner of settlement is contingent on future events. That approach was that the share-based payment transaction should be classified as either cash-settled or equity-settled in its entirety, depending on which settlement method is probable.

Some IASB members were concerned that the proposed amendment would introduce a principle for distinguishing between a liability and equity that would be inconsistent with the requirements in IAS 32. They also note that the definition of a liability is being discussed in the Conceptual Framework project. Accordingly, the IASB decided not to propose an amendment to IFRS 2 for this issue.

Nine IASB members agreed.

Accounting for a modification of a share-based payment from cash-settled to equity-settled

The IASB discussed an approach recommended by the Interpretations Committee for specifying the accounting for a modification to the terms and conditions of a cash-settled share-based payment that results in a change in the classification from cash-settled to equity-settled. The IASB tentatively decided to add guidance to IFRS 2 to clarify that:

  1. the share-based payment transaction would be measured by reference to the modification date fair value of the equity instruments granted as a result of the modification;
  2. the liability recognised in respect of the original cash-settled share-based payment should be derecognised upon the modification and the equity-settled share-based payment should be recognised to the extent that the services has been rendered up to the modification date; and
  3. the difference between the carrying amount of the liability as at the modification date and the amount recognised in equity at the same date should be recorded in profit or loss immediately.

All IASB members agreed.

Transition requirements for the narrow-scope amendments to IFRS 2

The IASB tentatively decided that the proposed amendments to IFRS 2 should be applied on a prospective basis. Notwithstanding that decision, the IASB tentatively decided that an entity should be permitted to apply retrospectively all the amendments that are applicable to it if the entity has the information necessary to do so.

All IASB members agreed.

Next steps

The staff will bring a summary of the due process steps undertaken on this project to a future IASB meeting.

Read the April IASB Update.