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Monday 22 December 2014

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Meeting Summaries and Agenda Papers


 IASB February 2014


 

The IASB discussed four proposed amendments to IFRS 2 that had been recommended by the IFRS Interpretations Committee. These proposed amendments relate to the following:

        a.         Accounting for cash-settled share-based payment transactions that include a performance condition;
        b.         Share-based payments in which the manner of settlement is contingent on future events;
        c.         Share-based payments settled net of tax withholdings; and 
        d.         Modification of a share-based payment transaction from cash-settled to equity-settled.

Agenda Paper 12C: Accounting for cash-settled share-based payment transactions that include a performance condition


The IASB tentatively decided that accounting for the effects of vesting conditions on a cash-settled share-based payment should follow the approach used for equity-settled share-based payments. Consequently the IASB tentatively decided to add:

        a.         further guidance to IFRS 2 on accounting for a cash-settled share-based payment transaction that includes a performance condition. This guidance will describe how a vesting or a non-vesting condition should be reflected in the measurement of cash-settled share-based payments; and 
        b.         an example in the Implementation Guidance of IFRS 2 to illustrate the effect of a performance condition on the measurement of a cash-settled share-based payment transaction.

Fourteen IASB members agreed.


Agenda Paper 12D: Share-based payments in which the manner of settlement is contingent on future events


The IASB discussed the approach recommended by the Interpretations Committee for providing guidance for the classification of a share-based payment transaction in which the manner of settlement is contingent on a future event that is outside the control of both the entity and the counterparty. 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 over the use of the notion of ‘probable’ when deciding the classification of a share-based payment transaction. They expressed a view that the share-based payment transaction described in the preceding paragraph is similar to a share-based payment transaction in which the counterparty has the choice of settlement, in that the entity does not have the unconditional right to avoid delivering cash or other assets. Hence, they thought that the share-based payment transaction should be accounted for, by analogy, in accordance with the requirements in paragraphs 35-40 of IFRS 2. Those IASB members noted that this view is consistent with the requirements for contingent settlement provisions in paragraph 25 of IAS 32. Other IASB members requested information on how each approach considered by the Interpretations Committee would change prevalent accounting practice.


Consequently, the IASB directed the staff to bring further analysis of the relevant requirements in IFRS to a future meeting of the IASB.


Agenda Paper 12E: Share-based payments settled net of tax withholdings

The IASB tentatively decided to add guidance to IFRS 2 that addresses limited types of share-based payment transactions with a net settlement feature as an exception to the requirements in IFRS 2. That guidance will specify that a share-based payment transaction in which the entity settles the share-based payment arrangement net, by withholding a specified portion of the equity instruments to meet its minimum statutory tax withholding requirements, should be classified as equity-settled in its entirety, if the entire share-based payment would otherwise be classified as equity-settled without the net settlement feature.


All IASB members agreed.


Agenda Paper 12F: Modification of a share-based payment transaction from cash-settled to equity-settled


The IASB discussed the approach recommended by the Interpretations Committee for clarifying the accounting for a modification to the terms and conditions of a cash-settled share-based payment transaction that results in a change in the classification from cash-settled to equity-settled. Applying that approach, 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.


Some IASB members question whether such measurement would be inconsistent with the requirement in paragraph 27 of IFRS 2 for the recognition of a minimum amount for the share-based payment following modifications to the terms and conditions of an equity-settled share-based payment transaction. Accordingly, the IASB directed the staff to perform further analysis on whether, and if so how, this requirement should be applied to a modification to the terms and conditions of a cash-settled share-based payment transaction.


Next steps


The staff will perform further analysis on the points raised in respect of the issues in Agenda Paper 12D and 12F as described above.

 

Date: 2/19/2014