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WorkpaperIFRS 2 — Share-based PaymentL3

Cash-settled award: liability remeasured at each closing date, change in profit or loss, settlement and entries

5 missions10 sections to document75 min
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Status
Published

Objective of the workpaper

Record the fair value of the right at the closing date (which reflects the market conditions and the non-vesting conditions), the number of rights expected to vest (which reflects the service and non-market performance conditions) and the elapsed share of the vesting period. Compute the liability at the closing date, reconcile it with the opening liability, the expense of the period, the decrease in fair value and the cash paid, then prepare the entries. The fair values, the numbers and the elapsed share are case data; the liability is remeasured until settlement.

10 sections · 27 blocks · 3 calculations · 3 entries

  • IFRS 2 §30

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

5 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Cash-settled share appreciation rights: remeasured liability, effect of the conditions (2016 amendment), external supplier and disclosures
Case tasks documented here
  • Compute the liability at 31 December 20X6.
  • Compute the liability at 31 December 20X7.
  • Compute the liability at the settlement date of 20X8.
  • Compute the expense of 20X6 and 20X7 and the decrease in fair value of 20X8.
  • Reconcile the closing liability of 20X7 and 20X8 with the opening liability.
1

Facts and data

Inputs

  • Award: beneficiaries, rights, grant date, vesting period, basis of the cash payment

    TextRequired

    SHARE_APPRECIATION_RIGHTS_FOR_50_EXECUTIVES_CASH_SETTLED_VESTING_OVER_TWO_YEARS

  • Inputs of the valuation of the fair value of the right at the closing date

    TextRequired

    FAIR_VALUE_PER_RIGHT_FROM_THE_VALUATION_REPORT_INCLUDING_THE_TARGET_PRICE_CONDITION

  • Number of rights expected to vest (case data)

    Number

    4,500 units

  • Unit fair value of the right at the closing date (case data)

    Number

    9

  • Total expected fair value at the closing date: fair value of the right × expected number (case data)

    NumberRequired

    40,500

  • Elapsed share of the vesting period (%, case data)

    NumberRequired

    50 %

  • Liability at the opening date

    Number

    0

  • Expense of the period: increase in the liability against profit or loss (calculated in the case)

    Number

    20,250

  • Decrease in the fair value of the liability in profit or loss (calculated in the case)

    Number

  • Cash paid on settlement (case data)

    Number

  • Closing liability per the ledger

    Number

    20,250

2

Supporting documents

Evidence

  • Documents obtained and referenced (plan rules, valuation report at the closing date, settlement notice, ledger)

    EvidenceRequired

3

Analysis of the liability of a cash-settled award

Analysis

IFRS 2 §30IFRS 2IFRS 2

  • Points examined: liability

    ChecklistRequired

    • Liability measured at its fair value
    • Liability remeasured at each closing date and at the settlement date, changes in profit or loss
    • Market conditions and non-vesting conditions taken into account in the fair value of the liability
    • Service and non-market performance conditions taken into account in the number of rights expected
    • Cumulative expense over the life of the award = cash finally paid
4

Calculations

Calculations

IFRS 2 §30

  • Liability at the closing date (total expected fair value × elapsed share)

    Calculation

    20,250

    Total expected fair value at the closing date: fair value of the right × expected number (case data) ; Elapsed share of the vesting period (%, case data)

  • Closing liability (opening + expense − decrease in fair value − cash paid)

    Calculation

    20,250

    Liability at the opening date ; Expense of the period: increase in the liability against profit or loss (calculated in the case) ; − Decrease in the fair value of the liability in profit or loss (calculated in the case) ; − Cash paid on settlement (case data) ; Closing liability per the ledger

  • Check: ledger liability − recomputed liability (expected: zero)

    Calculation

    0

    Liability at the opening date ; Expense of the period: increase in the liability against profit or loss (calculated in the case) ; − Decrease in the fair value of the liability in profit or loss (calculated in the case) ; − Cash paid on settlement (case data) ; Closing liability per the ledger

5

Illustrative entries

Entries

  • Entry of the expense of the period

    Entry

    AccountDebitCredit
    Services expense20,250
    Share-based payment liability20,250

  • Entry of the decrease in fair value

    Entry

    Debit Share-based payment liability ← Decrease in the fair value of the liability in profit or loss (calculated in the case) ; Credit Services expense (decrease in fair value) ← Decrease in the fair value of the liability in profit or loss (calculated in the case)

  • Entry of the cash settlement

    Entry

    Debit Share-based payment liability ← Cash paid on settlement (case data) ; Credit Cash paid ← Cash paid on settlement (case data)

6

Judgments: fair value inputs and vesting period

Judgment

IFRS 2 §30IFRS 2IFRS 2

  • Inputs of the fair value of the right

    JudgmentRequired

    Inputs supported by documents

    Inputs supported by documents / Inputs to be supported by further documents / Not applicable

    Professional judgment: the inputs of the valuation are estimates of the entity; in the case they are given and are not imposed by the standard.

  • Rationale: source and consistency of the inputs of the valuation

    Text

    VALUATION_REPORT_DESCRIBES_THE_MODEL_AND_THE_INPUTS

  • Vesting period retained

    JudgmentRequired

    Vesting period confirmed

    Vesting period confirmed / Vesting period revised / Not applicable

    Professional judgment: the elapsed share depends on the vesting period retained; it is given by the case.

  • Rationale: grant date and end of the service conditions

    Text

    VESTING_DATE_31_DECEMBER_20X7

7

Items to document for the disclosures

Disclosure

IFRS 2 §30

  • Information to prepare on cash-settled awards

    Checklist

    • Total carrying amount of the liability at the closing date
    • Total expense of the period for cash-settled awards
    • How the fair value was determined: model and inputs
8

Effect on the financial statements

FS impact

  • Effect derived from the entries

    Table

9

Conclusion

Conclusion

  • Liability at the closing date, change in fair value in profit or loss, settlement and judgments on the inputs and the vesting period

    ConclusionRequired

10

Normative references

References

  • Normative references cited in this workpaper

    References

11

Checks and financial statement impact

  • Award describedPass
  • Valuation inputs describedPass
  • Total expected fair value enteredPass
  • Elapsed share enteredPass
  • Inputs judged and supportedPass
  • Vesting period judged and supportedPass
  • Recomputed liability = ledger liabilityPass
  • Expense entry balancedPass
  • Decrease entry balancedNot evaluated
  • Settlement entry balancedNot evaluated
Assets
0
Liabilities
20,250
Profit or loss
-20,250
OCI
0
Equity
-20,250