IFRS 2 was initially announced in February 2004 and became effective for yearly periods starting on or after January 1, 2005.
What Do You Understand ByShared Based Payments?
In a share-based payment, an entity receives items or services in return for its equity instruments or incurs liabilities for amounts determined by the price of the firm's shares or other equity instruments. When a share-based payment is made, the accounting requirements are determined by whether the payment is made in stock, cash, or both.
Scope
All entities are required to comply with IFRS 2. Private and small enterprises are not exempt from the legislation.
There are a few exceptions to the concept of universal scope.
Stock issuance in a business combination must be accounted for by IFRS 3. In addition, the share-based payments made with acquisitions must be separated from those made to workers in exchange for their ongoing employment.
IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement do not apply to share-based payments as defined in IFRS 2 paragraphs 8-10 or 5-7. IAS 32 and 39 should be implemented if the contract is settled in shares or rights to shares.
Apart from transactions involving the acquisition of goods and services, IFRS 2 does not apply to share-based payment transactions. As a result, it lacks authority over dividends, the purchase of treasury shares, and the issuance of new shares.
Quantification and detection
A company's equity must be increased before it may issue new sncepts andhares or rights to purchase new shares. An offsetting debit entry must be expassumedensed when payment for goods or services does not represent an asset. The cost should be recorded immediately upon consumption of the goods or service. For instance, if a business issues stock or rights to stock to buy products, the stock or rights are added to inventory and are expensed only when the stock or rights are sold or damaged.
The grant-date fair value of any shares or rights vested or entitled to vest must be quickly depreciated. During the vesting period, it is that the shares distributed to employees are related to their services.
Conclusion
As of January 1, 2005, the standard will be applied to equity instruments given after November 7, 2002, but not yet fully vested. In addition, as of January 1, 2005, IFRS 2 applies to liabilities deriving from cash-settled transactions.
You should have a working knowledge of the accounting above co an ability to articulate them in terms of financial data.
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