IFRS 2 Fair value of equity instruments granted

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IFRS 2 Fair value of equity instruments granted – Share-based payment transactions with employees are measured with reference to the fair value of the equity instruments granted (IFRS 2.11).

The fair value of a equity instrument granted is determined as follows (IFRS 2.16-17):

  • If market prices are available for the actual equity instruments granted – i.e. shares or share options with the same terms and conditions – then the estimate of fair value is based on these market prices. IFRS 2 Fair value of equity instruments granted
  • If market prices are not available for the equity instruments granted, then the fair value of equity instruments granted is estimated using a valuation technique.

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Fair value measurement

Fair Value Measurement can present significant challenges for preparers of financial statements, particularly because it involves using judgment and estimation. Further, it is the market participant view that shapes fair value, so preparers need to monitor whether the valuation models and assumptions they use for financial reporting appropriately reflect those of market participants.

Fair Value Measurement under IFRS 13: Fair value measurement

  1. defines fair value;
  2. sets out in a single IFRS a framework for measuring fair value; and
  3. requires disclosures about fair value measurements.

The definition of fair value focuses on assets and liabilities because they are a primary subject of accounting measurement. In addition, IFRS 13 is applied to an entity’s own equity instruments measured at fair value.

The … Read more

Share-based payment

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In share-based payment transactions, an entity receives goods or services from a counterparty and grants equity instruments (equity-settled share-based payment transactions) or incurs a liability to deliver cash or other assets for amounts that are based on the price (or value) of equity instruments (cash-settled share-based payment transactions) as consideration.

The following transactions are not in the scope of IFRS 2:

  • transactions with counterparties acting as shareholders rather than as suppliers of goods or services;
  • transactions in which a share-based payment is made in exchange for control of a business; and
  • transactions in which contracts to acquire non-financial items in exchange for a share-based payment are in the scope of the financial instruments standards.

A ‘counterpartyRead more

IFRS 13 Fair value measurement

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IFRS 13 Fair value measurement IFRS 13 Fair Value Measurement is a single source of fair value measurement guidance that:

  • clarifies the definition of fair value, IFRS 13 Fair value measurement
  • provides a clear framework for measuring fair value, and IFRS 13 Fair value measurement
  • enhances the disclosures about fair value measurements. IFRS 13 Fair value measurement

Basis for use in other IFRS

IFRS 13 Fair Value Measurement applies to IFRSs that require or permit fair value measurements or disclosures. It does not introduce new fair value measurements, nor does it eliminate practicability exceptions to fair value measurements. In other words, IFRS 13 specifies how an entity should measure fair value and disclose information about fair value measurements. It does not specify … Read more