Indian Accounting Standard (Ind AS) 102, Share-based Payment, Important Material
IND AS 102: Share-based Payment
Transactions when entities purchase goods or services from other parties, such as supplier and employees, by issuing shares or share options are very common.
Share scheme are very common feature of director and executive remuneration and in some countries tax incentives are offered to encourage more companies to offer shares to employees. Companies whose shares or share options are regarded as a valuable ‘currency’ commonly use share-based payment to obtain employee and professional expertise.
If a company pays its employees in cash, an expense is recognized in profit or loss, in the same way if the payment is in share option, expense may not be recognized as there is no cost incurred, as the granting of shares or options does not require to entity to sacrifice cash or other assets. Here comes the question of accounting of Share Based Payment.
To specify the financial reporting by an entity when it undertakes a share-based payment transaction. It requires an entity to reflect in its profit or loss and financial position the effects of share-based payment transactions, including expenses associated with transactions in which share options are granted.
An entity shall apply it to all share-based payment transactions, in which an entity acquires or receives goods or services.
There are following three types of Share-based payments:
(a) equity-settled share-based payment transactions,
(b) cash-settled share-based payment transactions, and
(c) share based payment transaction with cash alternatives.
Non-applicability of Ind AS 102:
(i) Share issued as consideration in a business combination
(ii) Certain contract transactions falling within Ind AS 32 or Ind AS 109 relating to Financial Instruments.