Ind AS 102 - Share based payments

Part 1: Basics
1 Meaning of share based payments
2 Applicability of Ind AS 102
Part 2: SBP to employees
3 Basics of SBP to employees
Types of SBP and their treatment
Determination of fair value
4 Equity settled SBP
- Treatment and JEs
5 Cash settled SBP
- Treatment and JEs
- Remeasurement at reporting date
- Settlement at intrinsic value
6 Calculation of option expense
7 Meaning of vesting conditions
- Q: Can expense be postponed in case of market based vesting conditions ?
8 Modification or re-pricing of Equity settled SBP
9 Cancellation of Equity settled SBP
10 SBP with settlement alternatives
Part 3: SBP to non-employees
Part 4: Group SBP Plans
Part 5: Graded options
Part 6: Others
11 Fair value
12 Meaning of grant date and measurement date
13 SBP in business combination transaction
Part 7: Deferred tax impact in SBP transactions
 SBP

if Equity settled cash settled

iiy SBP Reserve SBP liab

ii FV on GRANT FV on
DATE REPORTING
DATE
FV
subsequent
Fv
changes subsequent
No treatment changes
Account for it
contract to
buy
100
kgs of wht after 3 mon

Net settle Gross

delivery
ftive
cash

i.fr ur
To ES

Indasio
 Ind AS 102
SHARE BASED PAYMENTS
1. MEANING

Goods/ Assets/ Services

Employee /
ENTITY
Non Employee

Cash based on
Shares of own
OR shares of own
entity
entity

Equity settled Cash settled

SBP SBP

2. APPLICABILITY
This standard does not apply to:
> any transaction with SHAREHOLDER in capacity of them being a shareholder;
Example: Rights issue, bonus issue, public issue, etc.
> Shares issued in business combination;
> Shares issued to buy/ sell non-financial item.

Intention

To take Delivery: Apply Ind AS 102

To settle NET basis: Apply Ind AS 109

3. SBP TO EMPLOYEES

i) Basics

Grant vesting
date

stgi Exertieri
Grant date Vesting period Exercise period
a
Date when SBP is approved by
Period over which vesting Period over which SBP can be
Shareholders +
conditions needs to be satisfied exercised.
Communicated to employees
ii) Fair Value
Use Fair value of option, calculated using option pricing model.
Equity settled SBP Fair value on grant date
Cash settled SBP Fair value on each reporting date

iii) Vesting condition

Service Condition Performance Condition Market linked

To remain in service for a Increase in earnings or Increase in MP of shares of

specified period. decrease in costs, etc. entity.
core
Record expense over service Record expense over estimated Record expense over estimated
period. vesting period. vesting period.
or Actualup
Vesting period is fixed at Vesting period needs to be re- Vesting period needs to be
grant date as service period. assessed at each reporting assessed at GRANT DATE, and
dates. no further re-assessment.

NOTE: If entity estimates that NOTE: If condition achieved

the condition will not be earliar, then prepone expenses.
achieved then do not record If the same is delayed then
any expense and reverse all record over estimated period
expense recognised earliar. and do not postpone.

Note: If SBP are unconditional i.e., vests immediately, entity should record expense
immediately.

iv) Calculation of OPTION EXPENSE

No. of Options per Expired period

till date
FV per option = XXX
employees employee Total vesting period

Less: Expense already recognised in previous years = (XXX)

Expense to be recognised in current year XXX

Best estimate Equity settled: Grant date

No. of employees on grant date Cash settled: Reporting dates
Less: Employees left till date
Less: Employees expected to leave

VD

100
91 90 90
A E E

YEI 100 6 90 90
A A E
YEZ 100 6 12 90

A A A
YE 1 00 6 12 15

1 1

Exp
lieb Res

Liot Res

Exp

lid Res

Tip
v) EQUITY SETTLED SBP

RD RD
R
At each reporting dates (over vesting period):
b
Employee benefit expense Debit Option expense for the year
To SBP Reserve Credit

On Exercise date
If exercised:
Bank Debit Exercise price
SBP Reserve Debit CA of SBP Reserve
To Equity capital Credit No of shares issued x Face value
To Securities premium Credit Balancing figure

If lapsed:
SBP Reserve Debit CA of SBP Reserve
To Retained earnings Credit

vi) CASH SETTLED SBP

RD
RD I 1
4DAt each reporting dates (over vesting period):
Employee benefit expense Debit Option expense for the year
To Provision for SAR Credit

On Exercise date
If exercised:
Provision for SAR Debit FV
Employee benefit expense
To Bank
PL Debit
Credit
Balancing figure
Intrinsic value on exercise date
IV
Note:
Fair value on each reporting date to be considered.
Subsequent to vesting period, but before options are exercised i.e., during exercise period,
provision for SAR needs to be re-measured at each reporting date. Re-measurement gain or loss
is recognised in P&L as Employee benefit expenses.

Provision for SAR are settled at INTRINSIC VALUE (MP - Exercise price).

on settlement EBE PL
any gll
 SBP Plans Expense No. of Fair value Total Vesting
booking Employees period
Equity SBP - Non market Best estimate Grant date
Estimated
Cash SBP - Non market Best estimate Reporting date
Best estimate Lower of
Equity SBP - Market Always Yes Grant date
Estimated or
Cash SBP - Market Always Yes Reporting date Actual VP

vii) Modification/ Repricing (Equity settled)

Favourable to employees Unfavourable to employees

Decrease in exercise price, hence FV of option Increase in exercise price, hence FV of option
increases decreases

TREATMENT: NO TREATMENT
Recognise option expenses as usual.
Incremental FV - recognised as expense
over remaining vesting period.

FV before modification on date of

Less: FV after modification modification

Example: An entity grants 1,000 equity settled options to 2,000 employees on 1st April 20X1.
Service period is 3 years. FV of option are:
1 April 20X1
31 Mar 20X2
Rs. 1.20 per option (2,000 employees)
Rs. 1.30 per option (1,850 employees)
ICAI TYK 09
31 Mar 20X3 Rs. 1.25 per option (1,840 employees)

FV of the options started decreasing and it was Rs. 0.90 per option on 30 Sept 20X2. Hence, the
entity decreased the exercise price which increased the fair value to Rs. 1.05 per option on such
date.

GD
301 1 It
1 2
I
1 2 a
4,1 311,31

Emg
FBE.mil 3 1840 1840
182
FV option incremental

ii n
1.5
year
 3019
1 Expertise Eipense Extense

I FLEE ÉÉ
732,000 732000
736,000

1 gggyggiqqqgap
11
gg

1840 1000 0.15 y

g
am
013
92000
92,000 184,000

viii) Cancellation of SBP (Equity settled)

STEP 1: Recognise entire SBP expense immediately in year of cancellation. Prepare all futy
STEP 2: Calculate the amount of compensation (if any) to be paid to employees. SBPemp
STEP 3: Compensation paid:
Upto FV on date of cancellation: Adjust from SBP reserve
Any excess: Adjust from P&L

Journal: SBP Reserve Debit FV on date of cancellation

P&L Debit Balancing figure
To Bank Credit Amount paid

STEP 4: Transfer the balance of SBP reserve to Retained earnings.

Journal: SBP Reserve Debit Remaining CA of SBP Reserve

To Retained earnings Credit
 ICAI Mus 11
Example: On 1 April 20X1, an entity granted 2,000 options to 10 directors. Service period is 3
years. FV of option on grant date is Rs. 130 per option. No. of employees:
31 Mar 20X2 8 directors
31 Mar 20X3 9 directors
cancel For 90 compas
31 Mar 20X4 9 directors
Entity planned to cancel the option plans on 31 Mar 20X3, when FV per option is Rs. 90 per
option. Compensation to be paid is Rs. 95 per option. Suggest treatment.

1 4 11 3131 2 313 73 31
20100
options
10directors 8 9 9
Expense
Expense
51 2000 9 130 Prepare all
2000 8 130 13 3 expenses
693333
693,333 1646667

52 Compensation
2000 9 95
17 10,000

Steps SBP Reserve Dr 2000 9 90

EBE Dr 90,000 Bal fig
To Bank 17,10 000

693,333 1646,667
SBP Reserve Dr
Steph 16,201000
To Retained Earnings
720,000
ix) SBP with SETTLEMENT ALTERNATIVE

Treat it as "COMPOUND FINANCIAL INSTRUMENT".

Accounting treatment - GRANT DATE

STEP 1: Calculate FV of equity option = No. of equity options

X FV on grant date with restrictions
STEP 2: Calc. FV of liability option i.e. No. of cash options X FV on grant date
STEP 3: Value of equity option = FV of liability option - Fair value of equity option

Note: If fair value of equity option (calculated in step 1) <= fair value of liability component
(step 2), then value of equity option (step 3) will be zero i.e. value attributable to equity option
cannot be negative.

Accounting treatment - VESTING PERIOD EBE Dr

Recognise as expense and SBP reserve for equity option. TO S BP Res
Recognise as expense and Provision for SAR for equity option.
To P SAR
Accounting treatment - EXERCISE DATE Tash
CASH SETTLEMENT EQUITY SETTLEMENT PARTLY EQUITY & PARTLY
Transfer liab to SBP Reserve CASH
Pay off at Intrinsic value.
Receive exercise price Apply accounting for each part
in the manner in which it is
Transfer SBP reserve to Issue equity shares.
settled.
retained earnings.
Journal: Journal:
Provision for SAR Debit Provision for SAR Debit
To Bank To SBP Reserve

SBP Reserve Debit Bank Debit

To Retained earnings SBP Reserve Debit
To Equity capital
To Securities premium

4. SBP TO NON-EMPLOYEES

EQUITY SETTLED CASH SETTLED

Asset / Expense Debit Asset / Expense Debit
To SBP Reserve To Provision for SAR
(Recognise at FV of goods / services / assets (Recognise at FV of goods / services / assets
acquired.) acquired.)

SBP Reserve Debit Provision for SAR Debit

To Equity capital To Bank
To Securities premium

Note: In case of continuous long service - recognise expense on accrual basis.

 Note: Accounting treatment of BARTER TRANSACTION

As per Ind AS 16 / 38 / 40
Asset

Entity Vendor

Asset

Recognise asset acquired at FV of asset given up.

In case, asset is acquired by issue of shares of own entity, then Ind AS 16 / 38 / 40 will not
apply and entity will recognise asset at its fair value.

5. GROUP SBP PLANS

Case A:
Shares of Parent Co.
Employees of Subsidiary
Parent Company
company
JE in books of Parent: JE in books of Subsidiary:
Inv in subsidiary Debit Employee expense Debit
To SBP reserve To Equity contribution

Case B:
Shares of Subsidiary Co.

Subsidiary Company Employees of Parent company

JE in books of Subsidiary: JE in books of Parent:
Equity Debit Employee expense Debit
To SBP reserve To Equity

NOTE: In consol FS, equity contribution and investment in subsidiary will get knocked off.

6. GRADED OPTIONS
In some cases, shares vests on different dates - treat them as separate plans and recognise
expense separately.

7. DEFERRED TAX IN SBP TRANSACTION

Not Tax deductible Tax deductible

No treatment Equity settled Cash settled
TD = Future deductions Calculate DTA to be
recognised.
Hence, recognise DTA
(Deductible TD x Tax rate)

Note If cumulative tan

dedn cumulative
expense recognised
 For excess EQUITY

Eg

ES
1
Afc 2 2 4 2
YD
Tax 008 3.5
6.40
TAF 1.92

40.24 be 0.87
DTA Dr DTA
PSL 0.75
To PSL TO
0.8 301 To Equity 0.12
04 30

DTA Dr 11 BS DTA 1.92

To PSL
1.05 0.24
DTA 1105
 Use of Fair values

SBP to employees SBP to Non emp

FV of equity inspument FV of a s A
ES Grant date Fv of Equity inst
cs Rep date

8584012637
 Nonfee onan

oplee GD

2373

1 41 1
1
291
1 1 1 1
YEZ

TVP Estimated VP

Performance cond
1 1
71 21A
29A 29A
I 1 1 1
500C TVP 2Y
oush ee 31 E 23
FV sh 122
me

100 1500 29 31412241

0

26,84000

00
150031 4 143
26,84 000
723,867

10 500 29 122 3
9 4 31
26840000 723867142
41
1728333
 It
31 12 71 EBE Dr 2684000
To SBP Reserve 26,84000
ESOP exp
Being recognised

Pass similar entries YEZ sYE3

for

Exp 4 SBP Reser

YES 2684000 2684000
YEZ 723867 3707867
YES 1728333 5136200

At YE3

SBP Reserve Dr 5136200

To ESC 421000
1007 500 29 29 21 10

To S Premium 471 5,200

1.1 5 Tillis 31 121 0 31121 731 12

l l l 1 1
1000 SAR VD IV 10 2
40 ee
11 SAR 12 8 713 12
6 30

ex ex
000 40 9 1211
90
1000
o
 216000 eup
Lief 216000
v

1000740 901 8 2
216000
72000 cup
Leaf 288000

Remeasure FV

Exercise Pay PV

1000 36 13
216000
72000

180000Mt
 Pay off Gemp

Prov 1000 6 13
78000
1000 67 10 60,000
Pay
E Prov SAR R 780000
To Bank 60000
TO EBE 18000

expense 180000 18000

1620006
Liab 390,0006
180000 78000
YEZ
I
288000 390000

PSL 180000
18000

1010
on 31 12 78
Remeasure
Pay off
1000 30 12 360000 390000
Exp
30,000

Prov for SAR DL 30000

TO EBE 30,000

12 1000 30 360000
Pay off
Prov for SAR DL 360000
To Bank 160000

it FV Repdate during up
2 EP Remeasure P L
During
3 E D
0
4 FV vs IV PSL
I 1 I I

75 400 210
4
15.75 75 400 220 2
Y

15.75
17 25
 75 400 215 3
y
15.75
17.25
15.375

75 4007 218 4 4
15.75
17.25
75.375
17.025

l l l l I
15.75 5 400 220
3
15.75
28.25
75 400 45 313
15.75 28.25
20.50 L
 1 4
40
70 3,131 1 17231131 3
l l l l
10000 SAR 951 92 891
FV 95 109
112 114

1 4 70 Expense 10000 95 950,000

EBE R 950000
TO Prov SAR 950000
3111 Expense 10000 112 951
1064000 950000
114000

31 3 Expense 10000 109 921

72
1002800 1064000
61200

31 Expense 10000
1014600
114 891
1002800
11800

Prov for SAR R 1014600

To Bank 1014600
Equity att cash att
FV 1500 102 FV 1000 113
153000 113000

obligation
 Value of Equity op 153000 113000
4 26.67 op
88
Fulop of ES on
grant date 26.67 op

overall

Nf If FV of as Frofes then fr of
ES will be zero but not
negative

fr of CS 160,000 113000
Fr 153000 153000
of ES
ES 40000
NIL

I I

ES 10005h FV 120 132

113 Exp 1000 120

1 1000 132

60000 60000
72,000
 51500 Sh
1500 26.67 1500 2067
102
1 2
FV 26.67 20000
20000 20,000

IE

111 1 No
entry
31 12 71 EBE Dr 80000
To SBP Reserve 20000

To Prov SAR 60000

31 12 72 EBE Dr 92,000
To SBP Reserve 20000

To Prov SAR 72,000

 31 12 12
I
Ee Cash Ee Equity

Prov SAR Dr 132000

To Bank IV 132000

SBP Reserve Dr 40000

To Retained 40,000
Earnings

Prov SAR Dr 132000

To SBP Reserve 132000

SBP Reserve Dr 172000

TO ESC SP 172000
 Perform
Id

10000 95 13 316667
0 95 2 3 316667
316667
10000 95 33 950000
 Marketcond
Achieve 4L
42
4L

l l l l

10000 120 4L per

3 year
EXP
41 42
42 4L
43 4L
 Estimated VP

limit to
years

100 25 10013
25
3
1 625
625
625
25 100
1
625 625 125

l l l l
625 625 625 625
 Subsidiary Parent

Id
30 1 4 1
Exp 5 3 5000

EBE Dr 5000 Bank Dr 3750

To Bank 3750 Invin s Du 1250
To Equity out 1250 To SBP Res 5000