MFRS 2 ‘Share-based Payment’ governs the accounting for share-based payment arrangements including employee agreements, and those with settlement alternatives allowing either equity instruments or cash settlements. The accounting treatment varies depending on whether the employee or the entity has the choice of settlement, with distinct approaches for compound financial instruments and present obligations to settle in cash.
Our ‘Insights into MFRS 2’ series is aimed at demystifying MFRS 2 by explaining the fundamentals of accounting for share-based payments using relatively simple language and providing insights to help entities cut through some of the complexities associated with accounting for these types of arrangements.
This article discusses share-based payment arrangements that provide either the entity or the employee with a choice as to whether settlement occurs in equity instruments or in cash or other assets (hereafter ‘cash’). The accounting treatment for agreements with settlement alternatives depends on which party has the choice of settlement.
Insights into MFRS 2
How we can help
We hope you find the information in this article helpful in giving you some insight into aspects of MFRS 2. If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact.
