This free, guided checker walks your finance team through the key decision points for IFRS 2 Cash-settled Share-based Payment. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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Cash-settled arrangements include phantom shares, share appreciation rights paid in cash, and bonuses indexed to share price; the defining feature is an obligation to deliver cash or other assets for amounts based on the entity's share price or value (IFRS 2 Appendix A). Check the plan rules for settlement choice: if the counterparty or the entity can elect share settlement, the compound-instrument and settlement-choice guidance in IFRS 2.34-43 applies instead, and a stated policy or past practice of settling in cash can make a nominally equity-settled plan cash-settled (IFRS 2.41).
Apply equity-settled share-based payment accounting under IFRS 2.10 through IFRS 2.22.
Official guidance: IFRS issued standards
Grant date is the date the entity and the counterparty agree to the arrangement with a shared understanding of its terms and conditions; if the award is subject to an approval process, grant date is when that approval is obtained (IFRS 2 Appendix A). Collect board or committee minutes, plan rules, and the award communications to employees as evidence. A common trap is treating an internal management decision as the grant when the terms have not yet been communicated to the counterparty.
Complete the grant-date criteria under IFRS 2 Appendix A; recognize services already being rendered with a liability at the current fair value estimate (IFRS 2.32-33).
Official guidance: IFRS issued standards
IFRS 2.33 requires the liability to be measured, initially and at each reporting date until settled, at the fair value of the award, applying an option pricing model where the award has option features such as share appreciation rights. Full-value phantom shares are commonly measured at the period-end share price adjusted for expected vesting; SARs need volatility, expected term, dividend yield, and risk-free rate inputs. A common misapplication is carrying the liability at intrinsic or grant-date value - the cash-settled model always requires full fair value at every measurement date.
Measure the cash-settled liability, initially and until settled, at the fair value of the obligation (IFRS 2.30; IFRS 2.33).
Official guidance: IFRS issued standards
Remeasurement continues for as long as the liability is outstanding, including after vesting and through to the settlement date (IFRS 2.30). Build it into the close calendar: refresh the share price, update expected vesting for forfeitures, and rerun the valuation model each period. Interim reporting dates count too - condensed statements under IAS 34 still need the liability at current fair value.
Implement a period-end remeasurement of the liability to fair value at each reporting date and at settlement (IFRS 2.30; IFRS 2.33).
Official guidance: IFRS issued standards
IFRS 2.30 sends every remeasurement of the cash-settled liability through profit or loss until settlement. Entities commonly present the service cost and the remeasurement together within employee benefit expense; showing the remeasurement on a separate line is acceptable if applied consistently. The common error is crediting remeasurement gains directly to equity by analogy to equity-settled awards - IFRS 2 draws exactly the opposite line for liabilities.
Recognize all fair value changes on the cash-settled liability in profit or loss for the period, not in equity or OCI (IFRS 2.30).
Official guidance: IFRS issued standards
Awards that vest immediately are presumed to relate to past service, so the full liability is recognized at once; awards conditional on future service build up over the vesting period (IFRS 2.32). The cumulative liability at each date equals period-end fair value multiplied by the elapsed portion of the vesting period and by awards expected to vest, so each period's expense is the movement in that cumulative amount. Graded-vesting tranches are treated as separate awards, each with its own vesting period.
Recognize services received and the liability over the vesting period, truing cumulative expense to the vesting-adjusted period-end fair value (IFRS 2.32; IFRS 2.33).
Official guidance: IFRS issued standards
IFRS 2.33A-33D mirror the equity-settled vesting logic for cash-settled liabilities: market conditions and non-vesting conditions go into the fair value per award (IFRS 2.33D), while service and non-market performance conditions drive the number of awards expected to vest (IFRS 2.33B-33C). Update the vesting estimate each reporting date using current headcount, attrition, and performance forecasts. The common trap is double counting - haircutting the per-award fair value for expected forfeitures while also reducing the award count.
Reflect service and non-market performance conditions by adjusting the number of awards expected to vest in the liability measurement (IFRS 2.33B; IFRS 2.33C).
Official guidance: IFRS issued standards
IFRS 2.30 requires the fair value of the liability to be remeasured at the date of settlement, so the carrying amount is trued to the cash actually paid and any residual difference lands in profit or loss in the settlement period. Trace a sample of settlements from payroll or treasury payment files back to the award subledger to confirm derecognition. If the entity instead settles by issuing equity instruments, revisit classification under the settlement-alternative guidance in IFRS 2.34-43.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
Select the model to fit the payoff: full-value phantom shares track the share price directly, while SARs behave like options and typically use Black-Scholes or a binomial model (IFRS 2.33). Market conditions such as share-price hurdles and non-vesting conditions belong inside the model per IFRS 2.33D, not in the vesting estimate. For unlisted entities, document the valuation of the underlying shares supporting the input price - a stale or unsupported equity value is the most frequent audit finding on these plans.
Obtain a fair value measurement using the current share price and an appropriate option pricing model reflecting the award's terms (IFRS 2.33; IFRS 2.33D).
Official guidance: IFRS issued standards
Maintain a roll-forward of the cash-settled liability showing service cost, remeasurement gains and losses, settlements, and forfeitures, reconciled to participant-level subledger data. The schedule underpins the IFRS 2.51(b) disclosure of the closing carrying amount and the intrinsic value of vested liabilities, and it is the primary audit support for expense completeness. Investigate reconciling items such as awards granted near period end and leavers not yet processed.
Reconcile the liability roll-forward to the award subledger and the general ledger before drafting the disclosures (IFRS 2.50; IFRS 2.51(b)).
Official guidance: IFRS issued standards
IFRS 2.44-45 require a description of each type of arrangement including settlement features and vesting terms; IFRS 2.46 requires disclosure of how fair value was measured; and IFRS 2.50-51 require the total expense from share-based payment transactions, the closing carrying amount of cash-settled liabilities, and the intrinsic value of liabilities for which the counterparty's right had vested by period end (IFRS 2.51(b)). Aggregate substantially similar plans, but keep cash-settled and equity-settled information distinguishable.
Recognition, measurement, and disclosure for the cash-settled awards are complete under IFRS 2.30-33D and IFRS 2.44-52; retain the valuation and reconciliation support. Complete the share-based payment note with the cash-settled liability disclosures required by IFRS 2.44-51.
Official guidance: IFRS issued standards
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