IFRS2 with both cash and equity settled option

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Sarb
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Joined: 27 Jan 2022, 10:34

IFRS2 with both cash and equity settled option

Post by Sarb »

Hi All,
Please help me with IFRS 2 as we have a new type of contracts for ESOP in which we leave the employee with a choice to get there options settled in either equity or cash. How can i book both options under IFRS2. Please help me with double entries. thanks a lot
JRSB
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Re: IFRS2 with both cash and equity settled option

Post by JRSB »

How frustrating when legal/HR issue such things without discussing with accounting first. My favourite is a 'simple' market-based vesting condition share option scheme :lol:
Sarb
Posts: 11
Joined: 27 Jan 2022, 10:34

Re: IFRS2 with both cash and equity settled option

Post by Sarb »

Thanks for the reply. I had a look at the example that is based on 80 share out of 100 are cash based but what if the contract contains both elements without any specific amount of share for cash and equity. Because in our ESOP agreements it has been mentioned that after vesting period it is your choice to get cash or equity , I.e. 100 shares have been given as ESOP and an employee has option to choose cash and equity. How would i treat this in the books.

Normally for cash settled
DR expense
CR Provision
After vesting period, Cr cash, Dr provision

Equity settled
DR expense
CR equity

How should i book with both options in single agreement.

Thanks
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Marek Muc
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Re: IFRS2 with both cash and equity settled option

Post by Marek Muc »

In this case the equity component is 0 and you book DR expense CR liability only
Sarb
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Joined: 27 Jan 2022, 10:34

Re: IFRS2 with both cash and equity settled option

Post by Sarb »

Thanks for the reply. I have another piece which i dont understand, what if an employee does not satisfy the vesting period and leaves the company in half way, how should i treat this in the books. Let suppose it is equity settled scheme

100 shares were granted at $1 each, vesting period 4 years, 25% each year
1st year
Cr $25 equity (100/1/4)
Dr $25 expense
2nd year
Cr $25 equity (100/2/4)
Dr $25 expense
3rd year ????

in the third year employee leaves, so what bookings should i carry out, do i need to reverse all the share grants or something else please provide the bookings in the example.
Thanks
JRSB
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Re: IFRS2 with both cash and equity settled option

Post by JRSB »

yes if the equity settled scheme doesn't vest then reverse entries
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Marek Muc
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Re: IFRS2 with both cash and equity settled option

Post by Marek Muc »

@Sarb please check the knowledge base article that I linked to before
Sarb
Posts: 11
Joined: 27 Jan 2022, 10:34

Re: IFRS2 with both cash and equity settled option

Post by Sarb »

Thank you all for your replies have a nice day. thx
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