The grant date: agreement on the terms and approvals obtained

Learning objectives

• Explain that the grant date is the date on which the parties agree to the terms and any necessary approvals have been obtained.L1
• Determine the grant date in a case in which shareholder approval is required and services have already begun.L2

Normative references

• IFRS 2Appendix A (defined terms, an integral part of the Standard): cash-settled and equity-settled share-based payment transactions, employees and others providing similar services, equity instrument (granted), fair value, grant date, intrinsic value, market condition, measurement date, performance condition, reload feature and reload option, service condition, share-based payment arrangement and transaction, share option, vest, vesting condition and vesting period. The grant date is the date of agreement on the terms or, where required, of approval.
• IFRS 2Grant date (Appendix A): the date at which the entity and another party, including an employee, agree to a share-based payment arrangement, both having a shared understanding of its terms and conditions; the entity then confers the right to cash, other assets or its equity instruments, subject to any vesting conditions. If the agreement is subject to an approval process (for example by shareholders), the grant date is the date of that approval.

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

3 questions

• A share-based payment arrangement is granted as soon as the plan is communicated to the counterparty, even if a required approval, for example that of the shareholders, has not yet been obtained.L1
• On 1 December, Alba SA communicates an option plan to its executives. The services concerned start on the following 1 January. The plan is subject to approval by the general meeting, obtained on 15 February; the terms do not change on that occasion. What is the grant date?L2
• An analyst writes: "The employees' services started on 1 January, but the plan was only approved on 15 February; there is therefore nothing to recognise for January and February, because fair value is only defined at the grant date." What is the error in this reasoning?L2