Share-Based Payments under IFRS (IFRS 2)

Companies often grant shares or share options to employees, directors, senior executives, or other parties such as suppliers and providers of professional services. The popularity of share plans and share option plans has made it imperative that accounting professionals understand how to account for share-based payment transactions.

The objective of IFRS 2 is to specify the financial reporting by an entity when it undertakes a share-based payment transaction. In particular, it requires an entity to reflect in its profit or loss and financial position the effects of share-based payment transactions, including expenses associated with transactions in which share options are granted to employees. IFRS 2 prescribes various disclosure requirements to enable users of financial statements to understand:

1. The nature and extent of share-based payment arrangements that existed during the period.
2. How the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period was determined.
3. The effect of share-based payment transactions on the entity’s profit or loss for the period and on its financial position.

Course Key Concepts: IFRS, IAS 1, Principles, Clarity, Reliability, Relevance, Comparability, Presentation, Financial Statements, Notes, Profit-or-Loss Statement, Share-based, Equity.