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No, for the purposes of this Standard, a transaction with an employee or other party in his/her capacity as a holder of equity instrument of the entity is not a share-based payment transaction. For example, if an entity grants all holders of a particular class of its equity instruments the right to acquire further equity instrument of the entity at a price that is less than the fair value of those equity instruments, and an employee receives such a right because he/she is a holder of equity instrument of that particular class, the granting or exercise of that right is not subject matter to the necessities of this Standard (AASB 2, Page 14, Para 12). Also share based payments are those payments which are given on the basis of company's equity or shares, however it does not only relates to employers but also to other stakeholders such as suppliers when they are counted as the recipient of the cost of goods and services.
According to AASB2 (p.11,para 4) "A share-based payment transaction may be settled by another group entity (or a shareholder of any group entity) on behalf of the entity receiving or acquiring the goods or services". It alsoapplies to an entity that:(a) receives goods or services when another entity in the same group (or a shareholder of any group entity) has the responsibility to settlethe share-based payment transaction; or (b) has an requirement to settle a share-based payment transaction when another entity in the same group receives the goods or services, unless the transaction is undoubtedly for a reason other than recompense for goods or services supplied to the entity being paid them.
Answer 2 C
According to AASB2 (119) employee bonuses may be counted as a share based payments. However it may be share based or employee benefited. Share options or other equity instruments are granted to employees as part of their remuneration package, in addition to cash salary and other employment benefits. Usually, it is not possible to measure directly the services received for particular components of the employee's remuneration package. It might also not be possible to measure the fair value of the total remuneration package independently, without measuring directly the fair value of the equity instruments granted.
Furthermore, shares or share options are sometimes granted as part of a bonus arrangement, rather than as a part of basic remuneration, for example, as an incentive to the employees to remain in the entity's employ or to reward them for their efforts inimproving the entity's performance. By granting shares or share options, in addition to other remuneration, the entity is paying additional remuneration to obtain additional benefits. It is very difficult to estimate the fair value of those benefits. Because of the difficulty of measuring directly the fair value of the servicesreceived, the entity shall measure the fair value of the employee services established by reference to the fair value of the equity instrument arranged (AASB2, P.14, Para 12). Share based payments mainly includes all executive option rather than just employee benefits or employee bonuses.
AASB2, P.13, Recognition 7 explains that "An entity shall recognise the goods or services established or acquire in a share-based payment transaction when it obtain the goods or the services are received". The entity shall recognise a consequent increase in equity if the goods or services were established in an equity-settled share-based payment transaction or a accountability if the goods or services were acquire in a cash-settled share-based payment transaction.
A corporate company when identifying the share based payments or share options mainly focus on complexity or the controversies which are there in recognizing the expenses share options which involves issue of share, share options or other equity which can affect both employees and supplies (other stakeholder in the company)
Typically, an expense arises from the consumption of goods or services. For example, services are typically consumed immediately, in which case an expense is recognised as the counterparty renders service. Goods might be consumed over a period of time or, in the case of inventories, sold at a later date, in which case an expense is recognised when the goods are consumed or sold.
However, sometimes it is necessary to recognise an expense before the goods or services are consumed or sold, because they do not qualify for recognition as assets. For example, an entity might acquire goods as part of the research phase of a project to develop a new product. Although those goods have not been consumed, they might not qualify for recognition as assets under the applicable Standard. (AASB, P.13, Recognition 9). Most companies argue against a share option expense recognition and debate on whether the transaction is between the shareholders and the employers or it is between the entity and employees. Question arises whether employees actually provide them services for the share options that are given by the company or not. It may well be argued that the recognition of the expenses is inconsistent.
The approach AASB use for the valuation of share options is Fair Value approach. (Deegan 2012, p.16, p.17, p.21)
Nature of the transaction
Amount at which the expense (or asset) and equity account are recognized
Transactions where the fair value of the goods or services can be measured reliably
At the fair value of the goods or services received
Transactions with employees (where there is a maintained assumption that the fair value of the services cannot be measured reliably)
At the fair value of the equity instruments being granted
In those 'rare situations' where the fair value of goods and services provided by non-employees cannot be measured reliably
At the fair value of the equity instruments being granted
Dr Salaries Expense (100000 * $0.90) $90000
Cr Share Options $90000
Dr Employee benefits expenses $15000
Cr Share Capital $15000
Dr Share Options (100000 * $3.50) $350000
Cr Share Capital $350000
(b) 31st March 2012
Dr Goodwill/ Patents $40000
Cr Share Capital $40000
Justifying the above entry-
According to AASB (explained in Para 12) "Transactions where the fair value of the goods and services can be measured reliably is the amount at the fair value of the goods and services received, whereas transactions with the employees and where there is a maintained assumption that the fair value of the services cannot be measured reliably is the fair value of the equity instruments being granted".