What you need to know about share-based payments

May 28, 2015

As technology and life sciences companies grow, they often use payments that are based on shares in exchange for goods or services. Where these organizations, either public or private, may be reporting using IFRS accounting standards, it is important that the terms of these share-based payment transactions are carefully analyzed to determine whether they are within the scope of IFRS 2.

The scope of IFRS 2

A share-based payment is defined as a transaction where goods or services are received and the entity settles by issuing equity or making a payment based on the value of its equity.

IFRS 2 also applies to transactions where there is a choice of settling either in cash, other assets, or equity.

Often share-based payment transactions are not identified when they are with non-employees, such as a supplier or consultant. However, the scope of IFRS 2 includes transactions with both employees and non-employees. A transaction with an employee or non-employee in their capacity as a holder of instruments of the entity is not a share-based payment transaction. IFRS 2 also contains exemptions for certain transactions that are within the scope of other standards as discussed in the examples below.

Common Examples of Scope Application


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