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IASB meeting summaries and observer notes

 IASB July 2006


The Board held a preliminary discussion of the comments received on the Exposure Draft of proposals to amend IFRS 2 Share-based Payment—Vesting Conditions and Cancellations.

The staff presented an analysis of the comments received in respect of vesting conditions and cancellations. The comments about transition requirements and consistency with SFAS 123 will be discussed at a future meeting.


Vesting conditions

The Exposure Draft proposed that vesting conditions should be restricted to service conditions and performance conditions. Most respondents supported the proposal, although some asked for further clarification of the definition of a performance condition.

The Board reaffirmed its proposal to restrict vesting conditions to service conditions and performance conditions. However, noting that the rationale for the amendment was given in the Basis for Conclusions, the Board asked the staff to consider revising the definition of a vesting condition in the standard to incorporate the information currently given in the Basis.

The Board also asked the staff to propose a definition of a performance condition, that would clarify the categorisation of conditions that affect whether an equity instrument could be received by a counterparty, including non-compete provisions.

Lastly, the Board accepted the staff’s proposal to expand the Implementation Guidance for IFRS 2 on the categorisation of all the conditions (including performance conditions) that determine whether a counterparty obtains the equity

instruments granted. The extra guidance could take the form of a simple organisation chart or table and should not necessitate re-exposure of the proposed amendments.


The Exposure Draft proposed that all cancellations, whether by the entity or a counterparty, should receive the same accounting treatment.

Many respondents disagreed with this proposal, arguing either that cancellations by counterparties and cancellations by an entity are economically different or that there should be an exemption for some types of plans eg Save As You Earn (SAYE) plans.

The Board noted that the rationale for the proposal, as stated in the Basis for Conclusions, is that there exist no non-arbitrary or unambiguous criteria for distinguishing a cancellation by a counterparty from a cancellation by an entity. Because no evidence has been presented that it is possible to make such a distinction, the Board reaffirmed its decision to require the same accounting treatment for all cancellations. The Board also reaffirmed the provisions in the ED that the amendment should apply to all share-based payment plans and that no exemptions should be made for SAYE or similar plans.

However, the Board asked the staff to explore whether there might be some types of events (for example, when an employee exercises a choice to stop making contributions to an SAYE) that are not one of the stated possible events under IFRS 2 and that might, therefore, require an accounting treatment, different from that of a lapse, forfeiture or cancellation.

The Board will discuss these issues and other issues arising from the responses to the Exposure Draft at a future meeting.

Date: 7/18/2006