HKFRS 2 - Share-based Payment (Condensed)
| Section | Key Concept | Brief Description |
|---|---|---|
| Objective & Scope | Financial reporting for share-based payments | Specifies accounting for equity-settled, cash-settled, and choice-of-settlement transactions; excludes certain transactions like business combinations and financial instruments. |
| Recognition | Recognise goods/services when received | Recognise corresponding increase in equity (equity-settled) or liability (cash-settled); expense if not qualifying as asset. |
| Equity-Settled Transactions | Measure at fair value of goods/services or equity instruments | For employees, measure at grant-date fair value of equity instruments; for non-employees, rebuttable presumption to measure goods/services directly. |
| Cash-Settled Transactions | Measure liability at fair value, remeasure each period | Recognise liability as services rendered; remeasure at each reporting date and at settlement, with changes in profit or loss. |
| Transactions with Cash Alternatives | Compound instrument (debt + equity components) | If counterparty has choice, account as compound instrument; if entity has choice, determine if present obligation to settle in cash. |
| Group Entity Transactions | Assess nature of awards and entity's rights/obligations | Recipient measures as equity-settled if receiving own equity or no obligation to settle; otherwise cash-settled. |
| Disclosures | Nature, extent, fair value determination, and effect on financial statements | Describe arrangements, option activity, fair value inputs, total expense, and liabilities. |
| Transitional Provisions | Apply to grants after 7 Nov 2002 not yet vested | Restate comparative information; specific transition rules for amendments. |
Objective and Scope
Objective
Specify financial reporting for share-based payment transactions, reflecting expenses in profit or loss and financial position.
Scope (Paragraph 2)
Applies to all share-based payment transactions:
- Equity-settled: Entity receives goods/services as consideration for its equity instruments.
- Cash-settled: Entity incurs liabilities based on the price of its shares or other equity instruments.
- Choice of settlement: Either entity or supplier can choose cash or equity settlement.
Exclusions (Paragraphs 4-6A)
| Exclusion | Reason |
|---|---|
| Transactions with holder of equity instruments (e.g., rights issue to all holders) | Not a share-based payment transaction (Paragraph 4) |
| Business combinations (HKFRS 3), common control combinations, joint venture formation | Acquiring goods as part of net assets (Paragraph 5) |
| Contracts within scope of HKAS 32 or HKFRS 9 | Financial instruments (Paragraph 6) |
Recognition
Basic Principle (Paragraph 7)
Recognise goods or services when obtained or as services are received:
- Equity-settled: Recognise corresponding increase in equity.
- Cash-settled: Recognise a liability.
Expense Recognition (Paragraphs 8-9)
If goods/services do not qualify as assets, recognise as expenses. Services are typically consumed immediately; goods may be consumed over time.
Equity-Settled Share-Based Payment Transactions
Measurement Principle (Paragraphs 10-13A)
Measure goods/services received at fair value. If fair value cannot be estimated reliably, measure indirectly by reference to fair value of equity instruments granted.
| Counterparty | Measurement Basis | Measurement Date |
|---|---|---|
| Employees | Fair value of equity instruments granted | Grant date |
| Non-employees | Rebuttable presumption: fair value of goods/services received | Date entity obtains goods or counterparty renders service |
Vesting Conditions (Paragraphs 14-21A)
- Immediate vesting: Recognise services in full on grant date.
- Graded vesting: Recognise over vesting period.
- Non-market vesting conditions: Adjust number of equity instruments expected to vest; no amount recognised if condition not met.
- Market conditions: Taken into account in fair value estimation; recognise services even if market condition not satisfied.
- Non-vesting conditions: Taken into account in fair value estimation.
Modifications, Cancellations, and Settlements (Paragraphs 26-29)
Recognise at minimum grant-date fair value. Cancellation or settlement during vesting period is treated as acceleration of vesting.
Cash-Settled Share-Based Payment Transactions
Measurement Principle (Paragraph 30)
Measure goods/services acquired and liability incurred at fair value of liability. Remeasure liability at each reporting date and at settlement, with changes in profit or loss.
Example: Share Appreciation Rights (SARs) (Paragraph 31)
Employees receive future cash payment based on increase in entity's share price.
Recognition (Paragraph 32)
Recognise services received and liability as employees render service.
Vesting and Non-Vesting Conditions (Paragraphs 33A-33D)
- Non-market vesting conditions: Adjust number of awards expected to vest.
- Market conditions and non-vesting conditions: Taken into account in fair value estimation and remeasurement.
Share-Based Payment Transactions with Cash Alternatives
General Principle (Paragraph 34)
Account as cash-settled to extent entity has liability to settle in cash; otherwise as equity-settled.
Counterparty Has Choice (Paragraphs 35-40)
Compound financial instrument with debt and equity components.
| Component | Accounting Treatment |
|---|---|
| Debt component | Cash-settled share-based payment (Paragraphs 30-33) |
| Equity component | Equity-settled share-based payment (Paragraphs 10-29) |
Entity Has Choice (Paragraphs 41-43)
Determine if present obligation to settle in cash. If no obligation, account as equity-settled. If entity elects settlement alternative with higher fair value, recognise additional expense.
Share-Based Payment Transactions Among Group Entities
Recipient Entity (Paragraph 43B)
Measure goods/services received as equity-settled if:
- Awards granted are its own equity instruments, OR
- Entity has no obligation to settle
Otherwise, measure as cash-settled.
Settling Entity (Paragraph 43C)
Recognise as equity-settled only if settled in its own equity instruments; otherwise cash-settled.
Disclosures
Nature and Extent (Paragraphs 44-45)
Describe each type of share-based payment arrangement, including vesting requirements, maximum term, and method of settlement. Disclose number and weighted average exercise prices of share options.
Fair Value Determination (Paragraphs 46-49)
Disclose how fair value was determined, including option pricing model and inputs (e.g., expected volatility, risk-free rate).
Effect on Financial Statements (Paragraphs 50-52)
Disclose total expense, carrying amount of liabilities, and intrinsic value of vested liabilities.
Transitional Provisions
Equity-Settled Transactions (Paragraphs 53-57)
Apply to grants after 7 November 2002 not yet vested at effective date. Restate comparative information.
Liabilities (Paragraphs 58-59)
Apply retrospectively to liabilities existing at effective date. Restate comparative information.
Amendments Application (Paragraph 59A)
Apply amendments prospectively; prior periods not restated.
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