IFRS 2Chapter 7Lesson 1
Settlement alternatives: who chooses, and must the entity pay in cash?
Step 1 of 6Learning objectives
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When a plan provides a choice between securities and cash, the classification follows the existence of a liability to settle in cash: counterparty choice = compound instrument, entity choice = present obligation test.
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Learning objectives
- Explain that the transaction is accounted for as cash-settled to the extent the entity has incurred a liability to settle in cash.
- Assess the existence of a present obligation to settle in cash from practices and plan terms.
- Explain the split of a grant with counterparty choice into a liability component and an equity component, then calculate and record both.
- Determine the classification of a grant where the entity chooses the settlement method and record the cash settlement of a grant classified as equity-settled.