This free, guided checker walks your finance team through the key decision points for IFRS 2 Group Share-based Payment Arrangements. 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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IFRS 2.3A brings into scope transactions where the entity receiving goods or services is not the entity that settles the award - typically a parent granting its shares or options to employees of a subsidiary. In separate or individual financial statements, the receiving entity and the settling entity may account for the same award differently (IFRS 2.43A). Map who receives the services, whose equity instruments are granted, and who is obliged to settle before applying the classification rules in IFRS 2.43B-43C.
Apply standard single-entity share-based payment accounting - equity-settled under IFRS 2.10-23 or cash-settled under IFRS 2.30-33 - because no other group entity settles the award.
Official guidance: IFRS issued standards
In its separate financial statements, the receiving entity classifies the transaction by assessing the nature of the awards granted and its own rights and obligations (IFRS 2.43A). It measures the services as equity-settled only when the awards are its own equity instruments or it has no obligation to settle the transaction; in all other circumstances it applies cash-settled accounting (IFRS 2.43B). Read the plan rules and any intercompany arrangements to establish which legal entity carries the settlement obligation - an intragroup recharge does not by itself create one (IFRS 2.43D).
Determine which entity is obliged to settle and classify the receiving entity's transaction under IFRS 2.43B before applying the group arrangement entries.
Official guidance: IFRS issued standards
IFRS 2.43B permits equity-settled treatment in the receiving entity only in two cases: the awards granted are its own equity instruments, or it has no obligation to settle the share-based payment. When the parent grants parent equity directly to subsidiary employees and the subsidiary has no settlement obligation, the subsidiary measures the services at grant-date fair value as equity-settled, remeasuring subsequently only for changes in non-market vesting conditions. Any obligation of the subsidiary to deliver cash based on the parent's share price forces cash-settled treatment in its separate accounts.
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Official guidance: IFRS issued standards
For an equity-settled group award, the receiving entity recognizes the services at the grant-date fair value of the instruments with a corresponding increase in equity treated as a capital contribution from the granting entity (IFRS 2.43B and the group application guidance in IFRS 2.B45-B61). The equity credit is separate from any intercompany recharge, which is a distinct transaction under IFRS 2.43D. Booking the credit as a payable both misclassifies equity and, if the balance is remeasured, imports cash-settled volatility that IFRS 2.43B does not permit.
Reclassify the credit from intercompany payable to equity as a capital contribution from the granting entity, as IFRS 2.43B and the IFRS 2.B45-B61 group guidance require.
Official guidance: IFRS issued standards
IFRS 2.43C requires the entity that settles a group share-based payment to classify it as equity-settled only if settlement is in its own equity instruments; a parent granting its own shares or options to subsidiary employees therefore accounts for the award as equity-settled in its separate financial statements. In practice the parent debits its investment in the subsidiary (as a capital contribution made) and credits equity over the vesting period. Omitting the parent-side entry leaves the group's separate financial statements out of balance with the subsidiary's capital-contribution credit.
Record the award as equity-settled in the granting parent's separate financial statements per IFRS 2.43C, typically as an increase in the investment in the subsidiary against equity.
Official guidance: IFRS issued standards
Some group arrangements include a repayment obligation requiring the receiving entity to pay the granting entity for the equity instruments provided; IFRS 2.43D requires the receiving entity to account for the share-based payment under IFRS 2.43B regardless of that intragroup repayment arrangement. The recharge is therefore a separate transaction - commonly treated as a distribution or a reduction of the capital contribution - and does not convert an equity-settled award into a cash-settled one. Review the recharge agreement for timing (on grant, vesting, or exercise) and basis (grant-date fair value versus intrinsic value at exercise), which drive the intercompany entries.
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Official guidance: IFRS issued standards
Because IFRS 2.43D keeps the award's classification independent of the repayment arrangement, the recharge is recognized as a separate intercompany transaction: a receivable in the granting entity and a payable in the receiving entity, with the receiving entity commonly reducing equity (the capital contribution) as the recharge accrues. Do not run the recharge through the income statement a second time - the IFRS 2 expense is already recognized from the services received. Align the recharge accrual with the agreement's trigger (vesting or exercise) and document the treatment of any excess of recharge over the grant-date fair value expense.
Record the recharge as a separate intercompany receivable and payable, distinct from the IFRS 2.43B capital-contribution equity entry, as IFRS 2.43D contemplates.
Official guidance: IFRS issued standards
When the receiving entity has an obligation to settle in cash or other assets - including cash payments indexed to the parent's share price - IFRS 2.43B requires cash-settled accounting: recognize a liability at the fair value of the obligation and remeasure it at each reporting date and at settlement, with changes in profit or loss (IFRS 2.30, IFRS 2.33). This can produce a different expense in the subsidiary's separate financial statements than the group recognizes on consolidation, which IFRS 2.43A explicitly acknowledges. Track the liability by grant so the remeasurement and the intercompany effects can be audited.
Recognize and remeasure a cash-settled liability in the receiving entity's separate financial statements per IFRS 2.43B and IFRS 2.30-33, notwithstanding the parent's equity-settled treatment.
Official guidance: IFRS issued standards
From the group's perspective there is a single equity-settled share-based payment: the consolidated financial statements recognize the total expense at grant-date fair value with a credit to equity, while intragroup recharge receivables and payables and the parent-subsidiary capital-contribution entries eliminate in full (IFRS 10.B86(c)). Prove that consolidated expense equals the sum of the services received across the group and that no intercompany share-based payment balance remains. Differences between separate-entity cash-settled measurement and the group's equity-settled measurement also reverse through the consolidation adjustments (IFRS 2.43A).
Prepare consolidation eliminations for the intercompany recharge balances and capital-contribution entries per IFRS 10.B86(c) so the group reports a single equity-settled expense.
Official guidance: IFRS issued standards
Because the same award can be equity-settled in one entity's separate financial statements and cash-settled in another's (IFRS 2.43A-43C), a three-column entry matrix - granting entity, receiving entity, consolidated - is the working paper that proves each ledger applies the right model. Include the capital contribution, the recharge, the settlement-obligation analysis, and the eliminations, and reconcile each column to the respective general ledger. This matrix also feeds statutory audits of the subsidiary, where the separate-entity treatment is frequently challenged.
Prepare the entry matrix documenting parent, subsidiary, and consolidated share-based payment entries under IFRS 2.43A-43D before closing the period.
Official guidance: IFRS issued standards
IFRS 2.44-45 require each entity presenting financial statements to describe the arrangements in which it participates, including vesting conditions and settlement, and IFRS 2.50-51 require the expense recognized. In the subsidiary's separate financial statements, the capital contribution from the parent and any recharge are related-party transactions requiring disclosure of the nature, amounts, and balances under IAS 24.18-19. Check the group and entity notes tell a consistent story - regulators compare the subsidiary's related-party note against the parent's share-based payment note.
The group share-based payment accounting and the IFRS 2.44-51 and IAS 24.18 disclosures are complete; retain the entry matrix and recharge documentation. Complete the arrangement, entity-level expense, and related-party recharge disclosures required by IFRS 2.44-51 and IAS 24.18 before issuing the financial statements.
Official guidance: IFRS issued standards
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