Group Cash-settled Share-based Payment Transactions IASB
Comments from ACCA
March 2008
ACCA is pleased to have this opportunity to comment on the Exposure Draft (ED) of proposed amendments to IFRS2 and IFRIC11 which was considered by ACCA's Financial Reporting Committee.
General comments
We essentially support the specific proposals in the ED, which clarify the current accounting requirements for group cash-settled share based payment transactions. However we retain reservations as to the manner in which the Board has chosen to address IFRS2 in general.
As a matter of principle we are not in favour of piecemeal amendments to accounting standards. In the context of IFRS2, we believe that the scope of the amendments in the ED is too narrow, and it would be more appropriate for an amended IFRS2 to emphasise a set of guiding principles rather than a series of rules based amendments. In addition, we see no reason why the Board does not take this opportunity to consider incorporating IFRIC11 within IFRS2. This would not only benefit those who currently need to refer to both, but also aid any future amendment.
ACCA responses to specific questions raised by IASB
Specifying how a subsidiary that receives goods or services from its suppliers (including employees) should account for cash-settled share-based payment arrangements described in new paragraph 3A of IFRIC 11
The proposed amendments specify that:
- in the financial statements of a subsidiary that receives goods or services from its suppliers under the arrangements described in new paragraph 3A of IFRIC 11, the subsidiary should apply IFRS 2 to account for the transactions with its suppliers. In other words, in the financial statements of the subsidiary, such cash-settled share-based payments are within the scope of IFRS 2 (see new paragraph 3A of IFRS 2 and new paragraph 11A of IFRIC 11).
- the subsidiary should measure the goods or services received from its suppliers in accordance with the requirements applicable to cash-settled share-based payment transactions, as set out in IFRS 2 (see new paragraph 11B of IFRIC 11).
Q1 Do you agree with the proposals? If not, why?
We agree with the Board's proposals to include group share-based payment arrangements that are cash-settled within the scope of IFRS2. This is consistent with what we consider to be the underlying principle of IFRS2, namely the appropriate accounting by an entity for transactions where it receives goods or services from its suppliers (or employees). This should be the case whether the arrangements are equity-settled or cash-settled.
On this basis, we therefore agree with the consequential amendment to IFRIC 11 (paragraph 3A) with regards the extension of scope for these types of transactions.
We also agree with the proposed clarification to IFRIC11 as set out in paragraph 11B, which specifies that the entity receiving the goods or services would measure them in accordance with the requirements applicable to cash-settled share based payment transactions, under IFRS2.
Transition
The proposed amendments to IFRS 2 and IFRIC 11 would be required to be applied retrospectively, subject to the transitional provisions of IFRS 2.
Q2 Do you agree with the proposal? If not, what do you propose and why?
We agree that the proposed amendments should be applied retrospectively, subject to the transitional provisions under IFRS2, which require full retrospective application for unsettled cash-settled transactions.
We would however suggest that the Board consider further clarification with regards to the interaction of IFRS1 and IFRS2 in respect of the relief offered by the former for first time adopters of IFRS. In particular the Board should consider whether this relief can be applied in the individual financial statements of the receiving entity.