Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: empanelment :: cpt :: due date for vat payment :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARD :: form 3cd :: ACCOUNTING STANDARDS :: VAT RATES :: TDS :: list of goods taxed at 4%
 
 
News Headlines »
 Income Tax saving investments: Top 5 options available for high-income individuals
 How to use zero tax rule on long term capital gains on stocks
 GST Returns - Furnishing details of inward supplies
 5 ways to maximise you income tax return
 Income-tax (2nd Amendment) Rules, 2017
 Soon, Faster PAN, An App For Filing Tax Returns
 Changes in income tax return filing process
 New Income Tax Rates And Deductions Applicable From April 1, 2017
 Tax and transparencya
 No decision yet on imposing tax on cash transactions
  Mentioning of Minor Head Code for accounting of Refund

Some vesting issues in share-based payments
August, 10th 2006
International Financial Reporting Standard 2 mandates measuring the cost of the scheme at fair value and amortising it over the vesting period. A few years ago, employee stock option schemes, or ESOPs as they are popularly known, were one of the stellar ways for compensating employees. Much has happened since, and we now have Share Purchase Plans, Optional Stock Plans and Restricted Stock Awards all variants of the original scheme but with subtle changes that can cause a conundrum in accounting. The International Financial Reporting Standard (IFRS) 2 on share-based payments appears to have kept pace with the law and has a solution for any issue that could come up. In substance, IFRS 2, whose scope stretches beyond employees to include share barter transactions with outsiders too, mandates measuring the cost of the scheme at fair value and amortising it over the vesting period. The fact that we are moving from an era of International Accounting Standards to an era of International Financial Reporting Standards suffices to conclude that the focus is going to shift from mere accounting to financial reporting. Reverse or write-off? Under IFRS 2, vesting conditions need to be satisfied for the share-based scheme to be successful. A few minimum vesting conditions are that the employee should continue to remain in service for a specified period or specified performance targets by the entity are to be met. However, in case there is a failure to meet the vesting condition, two different methods of accounting treatment are prescribed under IFRS 2. In case the failure is because of the employer, it is treated as an acceleration of vesting and all unamortised costs relating to the options are consumed in the income statement immediately. However, in case the failure originated from the employee, IFRS 2 is silent. An amendment has been proposed to IFRS 2 to ensure that employee cancellations are also treated on a par with employer cancellation and recognised in the profit and loss account in the year in which the cancellation occurs. There is also a certain degree of confusion about the vesting conditions themselves. By definition, these ensure that the counter-party pays for the instruments issued service and performance conditions set on an employee could be the simplest example. The issue arose as to whether the standard should stick to these as vesting conditions or look at others too regular plan contributions over a defined period or an initial grant in a matching share scheme, for instance. It concluded that it would not be necessary to consider the latter as vesting conditions owing to the sheer accounting imbroglios it can unfold and also because of the fact that the only conditions that ensure that the counter-party provides the services required to pay for the equity instruments granted are either the service conditions themselves, or the conditions that directly affect the services rendered. In case the amendments proposed are accepted, IFRS 2 would be consistent with SFAS 123 share-based payment which would eliminate one area of reconciliation between US GAAP and IFRS. Silent Mode We appear to have gone into a silent mode as far as issuing new standards are concerned, or amending already issued standards to ensure that they match the IFRS or IAS requirements. We have an early mover advantage since we have modelled our standards on IAS and all we need to do is a bit of tweaking. We have a Guidance Note on Stock Option Plans and Financial Instruments it provides alternative modes of treatment instead of mandating fair value as IFRS 2 and 7 dictate. Mohan R. Lavi (The author is a Hyderabad-based chartered accountant.)
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Careers

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions