The cash-settled liability: remeasured at each reporting date

Learning objectives

• Explain that the liability is remeasured at each reporting date and at the date of settlement, with changes recognised in profit or loss.L1
• Calculate the liability at a reporting date and the expense of the period for share appreciation rights.L2, L3
• Account for the expense, the remeasurement and the cash settlement.L2, L3

Normative references

• IFRS 2 §30For a cash-settled transaction, the entity measures the goods or services acquired and the liability incurred at the fair value of the liability, subject to paras. 31 to 33D; until the liability is settled, its fair value is remeasured at the end of each reporting period and at the date of settlement, with changes recognised in profit or loss for the period; example: share appreciation rights (para. 31).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

6 questions

• For a cash-settled transaction, the fair value of the liability is remeasured at each closing date and at the settlement date, the changes being recognised in profit or loss for the period.L1
• Brisa SA has granted its executives share appreciation rights settled in cash, with a four-year service condition. At the end of year two, the total fair value of the rights expected to vest, measured at that date, is {total_expected_fair_value} (case data). Case convention: the elapsed share of the vesting period is {elapsed_share}. The liability recognised at the previous closing is {liability_previous} and no cash has yet been paid. Compute the liability at the closing date, then the expense for the year.L2
• A controller writes: "Our share appreciation rights are settled in cash; we measured the liability at the grant-date fair value and will not adjust it again." What is the error?L2
• For cash-settled share appreciation rights with a three-year service condition, a controller allows for the expected leavers by reducing the unit fair value of each right. What is the error?L3
• Helia SA has granted cash-settled share appreciation rights, with a four-year service condition. At the end of year three, the fair value of all the rights granted, measured at that date and ignoring the service condition, is {fair_value_all_rights} (case data). The entity expects {expected_vest_percent} of the rights to vest; case convention: the elapsed share of the vesting period is {elapsed_share}. The 2016 amendment applies to annual periods beginning on or after 1 January 2018. Compute the fair value of the rights expected to vest, then the liability at the closing date.L3
• An analyst includes, in the computation of diluted earnings per share, share appreciation rights settled solely in cash, treating them as potential shares. What is the error?L3