HKFRS 2 Share-based Payment

1 HKFRS 2 Share-based Payment (click here for full text of HKFRS 2, Basis for Conclusions and Implementation Guidance). HKFRS 2 applies to transactions in which shares , share options or other equity instruments are granted to employees or other parties (equity-settled transactions). It also applies to transactions to be settled in cash or other assets (cash-settled transactions) that are Share-based because the Payment amount is based on the price of the entity's shares . HKFRS 2 requires an entity to reflect in its profit and loss and financial position the effects of Share-based Payment transactions, including expenses associated with share options granted to employees. For equity-settled Share-based Payment transactions with employees (and others providing similar services), the measurement of the transaction amount is based on the fair value of the equity instruments granted.

2 That fair value is measured at grant date. HKFRS 2 contains guidance on estimating the fair value of shares and share options granted, focusing on the specific terms and conditions that are common features of a grant of shares or share options to employees. In general, vesting conditions are not included in the grant date valuation but are instead taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the transaction amount is based on the number of equity instruments that eventually vest. The HKFRS sets out requirements if the terms and conditions of an option or share grant are modified (eg an option is repriced) or if a grant is cancelled, repurchased or replaced with another grant of equity instruments.

3 HKFRS 2 also contains requirements for equity-settled transactions with other parties (ie other than employees and those providing similar services). Furthermore, the HKFRS specifies requirements for cash-settled transactions, and transactions in which the terms of the arrangement provide either the entity or the supplier of goods or services with a choice of whether the entity settles the transaction in cash (or other assets) or by issuing equity instruments. HKFRS 2 is effective for periods beginning on or after 1 January 2005. It applies to grants of shares , share options or other equity instruments that were granted after 7 November 2002. and had not yet vested at the effective date of the HKFRS . It applies retrospectively to liabilities arising from Share-based Payment transactions existing at the effective date.