CHAPTER 40:

SMEs - SHARE-BASED PAYMENT

Types of Transactions:
1) Equity-settled share-based
payment transactions in
which the entity acquires
goods or services as
considerationn for equity
intruments of the entity
2) Cash-settled share-based
payment transactions, also referred
to as liability awards, in which the
entity receives goods or services
and incurs a liability

3) Share-based Transactions with Cash

Alternatives
Transactions which the entity receives goods or
services and the terms providd either the entity or
supplier with a choice (cash or equity instrument)
Transactions that may be settled by another group
entity or a shareholder of any group entity
 MEASUREMENTS:
Transactions from Transactions with
nonemployees: employees:

measured at fair value of

the goods or services measured at fair
received value of the
If the fair value of goods or equity
services cannot be instruments
measured reliably, granted at the
transactions are measured grant date
at fair value of the equity
instruments granted
measurement date is when
the entity obtains the goods
or services
 MEASUREMENT
1) Observable market price HIERARCHY FOR FAIR
available for the equity intrument VALUE OF SHARES
2) If not available, the entity-
specific market data may be
used, such as:
a recent transaction in the
shares of the entity
a recent independent
valuation of the entity or the
principal assets
3) If an observable market price is
not available and obtaining a
reliable measurment is
impracticable, a valuation
method that uses market data to
the greatest extent practicable
should be used
 SHARE OPTIONS

They are granted

to officers and
key employees to
enable them to
acquire shares of conceived as
the entity during additional
a specified price compensation
on the part of
officers and
key employees
a) If the share options vest immediately,
the employee is not required to
complete a specified period of service
before unconditionally entitled to
share options recognize expense
in full on grant date
b) If share options do not vest until the
employees complete a specified
service period compensation is
recognized as expense over the
service or vesting period
occurs when a grant of share options cancels or settles during the vesting period
recognize immediately the compensation expense otherwise would have been
recognized for services received over the remainder of the vesting period
Any payment made to the employee on the cancelation or settlement of the grant
shall be accounted for as the repurchase of equity interest (deduction from
equity)
If the payment exceed the fair value of the share option, excess shall be
recognized as an expense
1. the entity shall continue to
account for the equity instrument
based on the original conditions
if beneficial to emplyees and
increases FV, the entity shall
include the increase in fair
value as additional
compensation
Two compensations
recogized:
compensation based on
original condition
compensation based on
modification
2. The entity shall continue to
recognize compensation based
on original condition as if the
modification had never occured
under the ff:
the modification reduces
the FV
the modification is not
beneficial to the
employees
 Entitles an employee to receive cash which
is equal to the excess of MV of the entity's
share over a predetermined price
like a share option as to compensation for
services
unlike a share option, this creates a liability

Measurement:
based on the FV of the
liability at the reporting date
and shall be remeasured at
every year-end until settled
 Equity-settled
transactions:
SHARE-BASED TRANSACTIONS
WITH CASH ALTERNATIVE
a.) the entity
has a past
practice of
settling by
issuing equity
As a rule, the instrument
entity shall
account for
transactions as
cash settled b.) the
option has
no
commercial
substance
 Unidentified goods or services
Transactions where In such a case, the entity shall
equity equity instruments measure unidentifiable
are awarded for NIL or consideration as the difference
inadequate consideration between the FV of the equity
indicate that other instrument issued and the FV of
consideration has been the identifiable consideration at
or will be received. the date of the grant
PFRS for SMEs Full PFRS
- the share - the share
options must options shall be
be measured measured at FV
at FV on the on the date of the
date of the grant; if not
grant. The measured
intrinsict value reliably, the
of the share is intrinsict value is
not mentioned used
 Vesting conditions are the
DEFINITIONS: conditions required to be fulfilled for
the transfer of the equity instrument
to take place.
Grant date is a date when there is an
understanding between the entity
and the counterparty regarding the
terms and conditions of the share-
based payment arrangement.
Vesting date is a date when the
counterparty become an
entitlement.
Vesting period is the period of time
before counterparty become an
entitlement