Amendment - Vesting Conditions and Cancellations
The Board continued its redeliberations of the proposed amendment to IFRS 2 Share-based Payment—Vesting Conditions and Cancellations.
Treatment of non-vesting conditions
Some constituents had asked whether the proposed amendment would create new divergences between SFAS 123 (revised 2004) and IFRS 2. The Board acknowledged that the clarification in the amendment highlights some of the existing divergences between IFRS 2 and SFAS 123(R), particularly with respect to the treatment of non-vesting conditions. However, the Board noted that these differences are not new and were not created by the amendment.
One constituent asked the Board to consider whether the treatment of non-compete provisions in IFRS 2 should be made consistent with the treatment required in SFAS 123(R). The Board noted that there was no clear rationale for treating non-compete provisions differently from other non-vesting conditions in IFRS 2.
The grant date
The staff suggested a change to the proposed Implementation Guidance to confirm that the specified requirements apply only after the grant date, ie a share-based payment cannot be cancelled before it is granted. The Board accepted the suggestion.
The definition of grant date was not addressed by the proposed amendment to IFRS 2. However, there is an important interaction between the determination of the grant date and the cancellation requirements. Cancellation cannot occur before the grant date. Because the grant dates in IFRS 2 and SFAS 123(R) could be different, the same event could be treated as a reversal of expense by one standard (because grant date has not yet occurred) and an acceleration of expense by the other standard (because grant date has occurred).
The Board acknowledged this difference but noted that there are more significant differences between IFRS 2 and SFAS 123(R). For example, SFAS 123(R) does not include within its scope share-based payment transactions with non-employees. The Board also noted that it had previously decided to consider a second phase of work on convergence of the two standards after the project on distinguishing between liabilities and equity is completed. The Board decided that any further work in respect of the determination of the grant date should be considered as part of that second phase.