Recognise when received: as an expense or an asset

Learning objectives

• Explain that goods or services are recognised when they are received, as an asset if they qualify for recognition as such, otherwise as an expense.L1
• Account for a grant of instruments that vest immediately in exchange for services already rendered.L2

Normative references

• IFRS 2 §7Goods or services received or acquired are recognised when the entity obtains the goods or as the services are received; the corresponding entry is an increase in equity for an equity-settled transaction and a liability for a cash-settled transaction.
• IFRS 2 §8Goods or services received that do not qualify for recognition as assets are recognised as expenses.
• IFRS 2 §14If the equity instruments granted vest immediately, the counterparty is not required to complete a specified period of service: in the absence of evidence to the contrary, the entity presumes that the services have been received and recognises them in full on the grant date, with a corresponding increase in equity.

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

3 questions

• For an employee option plan settled in shares, the entity waits for the exercise date of the options to recognise the services received.L1
• Nordis SA receives consulting services, paid for in options, that do not meet the recognition criteria for an asset. How does it account for them as they are received?L1
• On 31 December, Nordis SA grants a consultant 5,000 options that vest immediately, with no condition at all, in return for services already rendered; the total fair value of the options at the grant date is {grant_date_fair_value}. Case convention: the services do not meet the criteria for recognition as an asset. Record the entry at the grant date.L2