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Share-based Payment

Ind AS - 102 - Rule - B. Indian Accounting Standards (Ind AS) - Companies Law - Ind AS - 102 - Indian Accounting Standard (Ind AS) 102 (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.). Objective 1 The objective of this Standard is to specify the financial reporting by an entity when it undertakes a transaction. In particular, it requires an entity to reflect in its profit or lo .....

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of the arrangement provide either the entity or the supplier of those goods or services with a choice of whether the entity settles the transaction in cash (or other assets) or by issuing equity instruments, except as noted in paragraphs 3A-6. In the absence of specifically identifiable goods or services, other circumstances may indicate that goods or services have been (or will be) received, in which case this Standard applies. 3 [Refer Appendix 1] 3A A transaction may be settled by another gro .....

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for goods or services supplied to the entity receiving them. 4 For the purposes of this Standard, a transaction with an employee (or other party) in his/her capacity as a holder of equity instruments of the entity is not a transaction. For example, if an entity grants all holders of a particular class of its equity instruments the right to acquire additional equity instruments of the entity at a price that is less than the fair value of those equity instruments, and an employee receives such a .....

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ity acquires goods as part of the net assets acquired in a business combination as defined by Ind AS 103, Business Combinations, in a combination of entities or businesses under common control as described in Appendix C of Ind AS 103, or the contribution of a business on the formation of a joint venture as defined by Ind AS 111, Joint Arrangements. Hence, equity instruments issued in a business combination in exchange for control of the acquiree are not within the scope of this Standard. However .....

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ransferred in exchange for control of the acquiree (and therefore within the scope of Ind AS 103) or are in return for continued service to be recognised in the post-combination period (and therefore within the scope of this Standard). 6 This Standard does not apply to transactions in which the entity receives or acquires goods or services under a contract within the scope of paragraphs 8-10 of Ind AS 32, Financial Instruments: Presentation, or paragraphs 2.4-2.7 of Ind AS 109, Financial Instrum .....

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the goods or services were received in an equity-settled transaction, or a liability if the goods or services were acquired in a cash-settled transaction. 8 When the goods or services received or acquired in a transaction do not qualify for recognition as assets, they shall be recognised as expenses. 9 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 .....

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nsumed, they might not qualify for recognition as assets under the applicable Ind AS. Equity-settled transactions Overview 10 For equity-settled transactions, the entity shall measure the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the entity shall measure their value, .....

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e fair value of those equity instruments shall be measured at grant date. 12 Typically, shares, share options or other equity instruments are granted to employees as part of their remuneration package, in addition to a 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 independentl .....

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l benefits. Estimating the fair value of those additional benefits is likely to be difficult. Because of the difficulty of measuring directly the fair value of the services received, the entity shall measure the fair value of the employee services received by reference to the fair value of the equity instruments granted. 13 To apply the requirements of paragraph 10 to transactions with parties other than employees, there shall be a rebuttable presumption that the fair value of the goods or servi .....

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obtains the goods or the counterparty renders service. 13A In particular, if the identifiable consideration received (if any) by the entity appears to be less than the fair value of the equity instruments granted or liability incurred, typically this situation indicates that other consideration (ie unidentifiable goods or services) has been (or will be) received by the entity. The entity shall measure the identifiable goods or services received in accordance with this Standard. The entity shall .....

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received 14 If the equity instruments granted vest immediately, the counterparty is not required to complete a specified period of service before becoming unconditionally entitled to those equity instruments. In the absence of evidence to the contrary, the entity shall presume that services rendered by the counterparty as consideration for the equity instruments have been received. In this case, on grant date the entity shall recognise the services received in full, with a corresponding increas .....

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nted share options conditional upon completing three years service, then the entity shall presume that the services to be rendered by the employee as consideration for the share options will be received in the future, over that three-year vesting period. (b) if an employee is granted share options conditional upon the achievement of a performance condition and remaining in the entity s employment until that performance condition is satisfied, and the length of the vesting period varies depending .....

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tent with the assumptions used in estimating the fair value of the options granted, and shall not be subsequently revised. If the performance condition is not a market condition, the entity shall revise its estimate of the length of the vesting period, if necessary, if subsequent information indicates that the length of the vesting period differs from previous estimates. Transactions measured by reference to the fair value of the equity instruments granted Determining the fair value of equity in .....

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ed using a valuation technique to estimate what the price of those equity instruments would have been on the measurement date in an arm s length transaction between knowledgeable, willing parties. The valuation technique shall be consistent with generally accepted valuation methodologies for pricing financial instruments, and shall incorporate all factors and assumptions that knowledgeable, willing market participants would consider in setting the price (subject to the requirements of paragraphs .....

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s employment for a specified period of time. There might be performance conditions that must be satisfied, such as the entity achieving a specified growth in profit or a specified increase in the entity s share price. Vesting conditions, other than market conditions, shall not be taken into account when estimating the fair value of the shares or share options at the measurement date, Instead, vesting conditions, other than market conditions, shall be taken into account by adjusting the number o .....

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the counterparty fails to complete a specified service period, or a performance condition is not satisfied, subject to the requirements of paragraph 21. ] 20 To apply the requirements of paragraph 19, the entity shall recognise an amount for the goods or services received during the vesting period based on the best available estimate of the number of equity instruments expected to vest and shall revise that estimate, if necessary, if subsequent information indicates that the number of equity ins .....

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ty shall recognise the goods or services received from a counterparty who satisfies all other vesting conditions (eg services received from an employee who remains in service for the specified period of service), irrespective of whether that market condition is satisfied. Treatment of non-vesting conditions 21A Similarly, an entity shall take into account all non-vesting conditions when estimating the fair value of the equity instruments granted. Therefore, for grants of equity instruments with .....

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granted at the measurement date. Instead, a reload option shall be accounted for as a new option grant, if and when a reload option is subsequently granted. After vesting date 23 Having recognised the goods or services received in accordance with paragraphs 10-22, and a corresponding increase in equity, the entity shall make no subsequent adjustment to total equity after vesting date. For example, the entity shall not subsequently reverse the amount recognised for services received from an emplo .....

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ents granted. In rare cases, the entity may be unable to estimate reliably the fair value of the equity instruments granted at the measurement date, in accordance with the requirements in paragraphs 16- 22. In these rare cases only, the entity shall instead: (a) measure the equity instruments at their intrinsic value, initially at the date the entity obtains the goods or the counterparty renders service and subsequently at the end of each reporting period and at the date of final settlement, wit .....

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ods or services received during the vesting period, if any, in accordance with paragraphs 14 and 15, except that the requirements in paragraph 15(b) concerning a market condition do not apply. The amount recognised for goods or services received during the vesting period shall be based on the number of share options expected to vest. The entity shall revise that estimate, if necessary, if subsequent information indicates that the number of share options expected to vest differs from previous est .....

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will be taken into account when applying the intrinsic value method set out in paragraph 24. However, if an entity settles a grant of equity instruments to which paragraph 24 has been applied: (a) if the settlement occurs during the vesting period, the entity shall account for the settlement as an acceleration of vesting, and shall therefore recognise immediately the amount that would otherwise have been recognised for services received over the remainder of the vesting period. (b) any payment .....

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re granted. For example, it might reduce the exercise price of options granted to employees (ie reprice the options), which increases the fair value of those options. The requirements in paragraphs 27-29 to account for the effects of modifications are expressed in the context of transactions with employees. However, the requirements shall also be applied to transactions with parties other than employees that are measured by reference to the fair value of the equity instruments granted. In the la .....

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ions to the terms and conditions on which the equity instruments were granted, or a cancellation or settlement of that grant of equity instruments. In addition, the entity shall recognise the effects of modifications that increase the total fair value of the arrangement or are otherwise beneficial to the employee. Guidance on applying this requirement is given in Appendix B. 28 If a grant of equity instruments is cancelled or settled during the vesting period (other than a grant cancelled by for .....

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he extent that the payment exceeds the fair value of the equity instruments granted, measured at the repurchase date. Any such excess shall be recognised as an expense. However, if the arrangement included liability components, the entity shall remeasure the fair value of the liability at the date of cancellation or settlement. Any payment made to settle the liability component shall be accounted for as an extinguishment of the liability. (c) if new equity instruments are granted to the employee .....

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acement equity instruments and the net fair value of the cancelled equity instruments, at the date the replacement equity instruments are granted. The net fair value of the cancelled equity instruments is their fair value, immediately before the cancellation, less the amount of any payment made to the employee on cancellation of the equity instruments that is accounted for as a deduction from equity in accordance with (b) above. If the entity does not identify new equity instruments granted as r .....

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r as a deduction from equity, except to the extent that the payment exceeds the fair value of the equity instruments repurchased, measured at the repurchase date. Any such excess shall be recognised as an expense. Cash-settled transactions 2[ 30 For cash-settled transactions, the entity shall measure the goods or services acquired and the liability incurred at the fair value of the liability, subject to the requirements of paragraphs 31-33D. Until the liability is settled, the entity shall remea .....

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d of time. Alternatively, an entity might grant to its employees a right to receive a future cash payment by granting to them a right to shares (including shares to be issued upon the exercise of share options) that are redeemable, either mandatorily (for example, upon cessation of employment) or at the employee s option. These arrangements are examples of cash-settled transactions. Share appreciation rights are used to illustrate some of the requirements in paragraphs 32-33D; however, the requi .....

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in exchange for the share appreciation rights have been received. Thus, the entity shall recognise immediately the services received and a liability to pay for them. If the share appreciation rights do not vest until the employees have completed a specified period of service, the entity shall recognise the services received, and a liability to pay for them, as the employees render service during that period. 4[ 33 The liability shall be measured, initially and at the end of each reporting perio .....

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d to equity-settled is given in paragraphs B44A-B44C in Appendix B. ] 5[Treatment of vesting and non-vesting conditions 33A A cash-settled transaction might be conditional upon satisfying specified vesting conditions. There might be performance conditions that must be satisfied, such as the entity achieving a specified growth in profit or a specified increase in the entity s share price. Vesting conditions, other than market conditions, shall not be taken into account when estimating the fair va .....

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e expected to vest. The entity shall revise that estimate, if necessary, if subsequent information indicates that the number of awards that are expected to vest differs from previous estimates. On the vesting date, the entity shall revise the estimate to equal the number of awards that ultimately vested. 33C Market conditions, such as a target share price upon which vesting (or exercisability) is conditioned, as well as non-vesting conditions, shall be taken into account when estimating the fair .....

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obligation associated with a and transfer that amount, normally in cash, to the tax authority on the employee s behalf. To fulfil this obligation, the terms of the arrangement may permit or require the entity to withhold the number of equity instruments equal to the monetary value of the employee s tax obligation from the total number of equity instruments that otherwise would have been issued to the employee upon exercise (or vesting) of the (i.e. the arrangement has a net settlement feature ). .....

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for as a deduction from equity for the shares withheld, except to the extent that the payment exceeds the fair value at the net settlement date of the equity instruments withheld. 33H The exception in paragraph 33F does not apply to: (a) a arrangement with a net settlement feature for which there is no obligation on the entity under tax laws or regulations to withhold an amount for an employee s tax obligation associated with that ; or (b) any equity instruments that the entity withholds in exce .....

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saction in cash (or other assets) or by issuing equity instruments, the entity shall account for that transaction, or the components of that transaction, as a cash-settled transaction if, and to the extent that, the entity has incurred a liability to settle in cash or other assets, or as an equity-settled transaction if, and to the extent that, no such liability has been incurred. transactions in which the terms of the arrangement provide the counterparty with a choice of settlement 35 If an ent .....

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is measured directly, the entity shall measure the equity component of the compound financial instrument as the difference between the fair value of the goods or services received and the fair value of the debt component, at the date when the goods or services are received. 36 For other transactions, including transactions with employees, the entity shall measure the fair value of the compound financial instrument at the measurement date, taking into account the terms and conditions on which th .....

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settlement are often structured so that the fair value of one settlement alternative is the same as the other. For example, the counterparty might have the choice of receiving share options or cash-settled share appreciation rights. In such cases, the fair value of the equity component is zero, and hence the fair value of the compound financial instrument is the same as the fair value of the debt component. Conversely, if the fair values of the settlement alternatives differ, the fair value of t .....

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ds or renders service, in accordance with the requirements applying to cash-settled transactions (paragraphs 30-33). For the equity component (if any), the entity shall recognise the goods or services received, and an increase in equity, as the counterparty supplies goods or renders service, in accordance with the requirements applying to equity-settled transactions (paragraphs 10-29). 39 At the date of settlement, the entity shall remeasure the liability to its fair value. If the entity issues .....

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ver, this requirement does not preclude the entity from recognising a transfer within equity, ie a transfer from one component of equity to another. transactions in which the terms of the arrangement provide the entity with a choice of settlement 41 For a transaction in which the terms of the arrangement provide an entity with the choice of whether to settle in cash or by issuing equity instruments, the entity shall determine whether it has a present obligation to settle in cash and account for .....

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the requirements applying to cash-settled transactions, in paragraphs 30-33. 43 If no such obligation exists, the entity shall account for the transaction in accordance with the requirements applying to equity-settled transactions, in paragraphs 10-29. Upon settlement: (a) if the entity elects to settle in cash, the cash payment shall be accounted for as the repurchase of an equity interest, ie as a deduction from equity, except as noted in (c) below. (b) if the entity elects to settle by issuin .....

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n the fair value of the equity instruments issued and the amount of cash that would otherwise have been paid, whichever is applicable. transactions among group entities 43A For transactions among group entities, in its separate or individual financial statements, the entity receiving the goods or services shall measure the goods or services received as either an equity-settled or a cash-settled transaction by assessing: (a) the nature of the awards granted, and (b) its own rights and obligations .....

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ransaction only for changes in non-market vesting conditions in accordance with paragraphs 19-21. In all other circumstances, the entity receiving the goods or services shall measure the goods or services received as a cash-settled transaction. 43C The entity settling a transaction when another entity in the group receives the goods or services shall recognise the transaction as an equity-settled transaction only if it is settled in the entity s own equity instruments. Otherwise, the transaction .....

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statements to understand the nature and extent of arrangements that existed during the period. 45 To give effect to the principle in paragraph 44, the entity shall disclose at least the following: (a) a description of each type of arrangement that existed at any time during the period, including the general terms and conditions of each arrangement, such as vesting requirements, the maximum term of options granted, and the method of settlement (eg whether in cash or equity). An entity with subst .....

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e period; and (vii) exercisable at the end of the period. (c) for share options exercised during the period, the weighted average share price at the date of exercise. If options were exercised on a regular basis throughout the period, the entity may instead disclose the weighted average share price during the period. (d) for share options outstanding at the end of the period, the range of exercise prices and weighted average remaining contractual life. If the range of exercise prices is wide, th .....

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of goods or services received as consideration for equity instruments of the entity indirectly, by reference to the fair value of the equity instruments granted, to give effect to the principle in paragraph 46, the entity shall disclose at least the following: (a) for share options granted during the period, the weighted average fair value of those options at the measurement date and information on how that fair value was measured, including: (i) the option pricing model used and the inputs to t .....

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n grant were incorporated into the measurement of fair value, such as a market condition. (b) for other equity instruments granted during the period (ie other than share options), the number and weighted average fair value of those equity instruments at the measurement date, and information on how that fair value was measured, including: (i) if fair value was not measured on the basis of an observable market price, how it was determined; (ii) whether and how expected dividends were incorporated .....

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plicable. 48 If the entity has measured directly the fair value of goods or services received during the period, the entity shall disclose how that fair value was determined, eg whether fair value was measured at a market price for those goods or services. 49 If the entity has rebutted the presumption in paragraph 13, it shall disclose that fact, and give an explanation of why the presumption was rebutted. 50 An entity shall disclose information that enables users of the financial statements to .....

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ises from transactions accounted for as equity-settled transactions; (b) for liabilities arising from transactions: (i) the total carrying amount at the end of the period; and (ii) the total intrinsic value at the end of the period of liabilities for which the counterparty s right to cash or other assets had vested by the end of the period (eg vested share appreciation rights). 6[ 52 If the information required to be disclosed by this Standard does not satisfy the principles in paragraphs 44, 46 .....

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x 1] 59A An entity shall apply the amendments in paragraphs 30-31, 33-33H and B44A-B44C as set out below. Prior periods shall not be restated. (a) The amendments in paragraphs B44A-B44C apply only to modifications that occur on or after the date that an entity first applies the amendments. (b) The amendments in paragraphs 30-31 and 33-33D apply to transactions that are unvested at the date that an entity first applies the amendments and to transactions with a grant date on or after the date that .....

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ested but unexercised), at the date that an entity first applies the amendments and to transactions with a grant date on or after the date that an entity first applies the amendments. For unvested (or vested but unexercised) sharebased payment transactions (or components thereof) that were previously classified as cash-settled s but now are classified as equity-settled in accordance with the amendments, an entity shall reclassify the carrying value of the liability to equity at the date that it .....

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Appendix 1] 63D Amendments to Classification and Measurement of Transactions under Ind AS 102 amended paragraphs 19, 30-31, 33 and 52 and added paragraphs 33A-33H, 59A-59B, 63D and B44A-B44C and their related headings. An entity shall apply those amendments for annual periods beginning on or after 1 April, 2017.] 1 This Standard uses the phrase by reference to rather than at , because the transaction is ultimately measured by multiplying the fair value of the equity instruments granted, measured .....

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, say, General Reserves when the options are not exercised. 4 In paragraphs 35-43, all references to cash also include other assets of the entity. 5 The Framework for the Preparation and Presentation of Financial Statements in accordance with Indian Accounting Standards issued by the Institute of Chartered Accountants of India, defines a liability as a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resourc .....

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of those goods or services for amounts that are based on the price (or value) of equity instruments (including shares or share options) of the entity or another group entity. employees and others providing similar services Individuals who render personal services to the entity and either (a) the individuals are regarded as employees for legal or tax purposes, (b) the individuals work for the entity under its direction in the same way as individuals who are regarded as employees for legal or tax .....

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to an equity instrument of the entity conferred by the entity on another party, under a arrangement. equity-settled transaction A transaction in which the entity (a) receives goods or services as consideration for its own equity instruments (including shares or share options), or (b) receives goods or services but has no obligation to settle the transaction with the supplier. fair value The amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could .....

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agreement is subject to an approval process (for example, by shareholders), grant date is the date when that approval is obtained. intrinsic value The difference between the fair value of the shares to which the counterparty has the (conditional or unconditional) right to subscribe or which it has the right to receive, and the price (if any) the counterparty is (or will be) required to pay for those shares. For example, a share option with an exercise price of ₹ 15, on a share with a fair .....

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market price (or value) of the entity s equity instruments (or the equity instruments of another entity in the same group) relative to an index of market prices of equity instruments of other entities. A market condition requires the counterparty to complete a specified period of service (ie a service condition); the service requirement can be explicit or implicit. measurement date The date at which the fair value of the equity instruments granted is measured for the purposes of this Ind AS. For .....

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specified performance target(s) to be met while the counterparty is rendering the service required in (a). The period of achieving the performance target(s): (a) shall not extend beyond the end of the service period; and (b) may start before the service period on the condition that the commencement date of the performance target is not substantially before the commencement of the service period. A performance target is defined by reference to: (a) the entity s own operations (or activities) or .....

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ides for an automatic grant of additional share options whenever the option holder exercises previously granted options using the entity s shares, rather than cash, to satisfy the exercise price. reload option A new share option granted when a share is used to satisfy the exercise price of a previous share option. service condition A vesting condition that requires the counterparty to complete a specified period of service during which services are provided to the entity. If the counterparty, re .....

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g shares or share options) of the entity or another group entity, or (b) equity instruments (including shares or share options) of the entity or another group entity, provided the specified vesting conditions, if any, are met. transaction A transaction in which the entity (a) receives goods or services from the supplier of those goods or services (including an employee) in a arrangement, or (b) incurs an obligation to settle the transaction with the supplier in a arrangement when another group e .....

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ition that determine whether the entity receives the services that entitle the counterparty to receive cash, other assets or equity instruments of the entity, under a arrangement. A vesting condition is either a service condition or a performance condition. vesting period The period during which all the specified vesting conditions of a arrangement are to be satisfied. Appendix B Application guidance This appendix is an integral part of the Ind AS. Estimating the fair value of equity instruments .....

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the valuation issues discussed below (eg determining expected volatility) also apply in the context of estimating the fair value of shares or share options granted to parties other than employees at the date the entity obtains the goods or the counterparty renders service. Shares B2 For shares granted to employees, the fair value of the shares shall be measured at the market price of the entity s shares (or an estimated market price, if the entity s shares are not publicly traded), adjusted to .....

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n into account, but only to the extent that the post-vesting restrictions affect the price that a knowledgeable, willing market participant would pay for that share. For example, if the shares are actively traded in a deep and liquid market, post-vesting transfer restrictions may have little, if any, effect on the price that a knowledgeable, willing market participant would pay for those shares. Restrictions on transfer or other restrictions that exist during the vesting period shall not be take .....

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of the options granted shall be estimated by applying an option pricing model. B5 The entity shall consider factors that knowledgeable, willing market participants would consider in selecting the option pricing model to apply. For example, many employee options have long lives, are usually exercisable during the period between vesting date and the end of the options life, and are often exercised early. These factors should be considered when estimating the grant date fair value of the options. .....

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vesting date, the factors identified above may not apply. In these instances, the Black-Scholes-Merton formula may produce a value that is substantially the same as a more flexible option pricing model. B6 All option pricing models take into account, as a minimum, the following factors: (a) the exercise price of the option; (b) the life of the option; (c) the current price of the underlying shares; (d) the expected volatility of the share price; (e) the dividends expected on the shares (if appro .....

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riods specified by securities regulators). This factor shall be taken into account if the option pricing model applied would otherwise assume that the option could be exercised at any time during its life. However, if an entity uses an option pricing model that values options that can be exercised only at the end of the options life, no adjustment is required for the inability to exercise them during the vesting period (or other periods during the options life), because the model assumes that th .....

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setting the price of a share option (or other equity instrument) shall not be taken into account when estimating the fair value of share options (or other equity instruments) granted. For example, for share options granted to employees, factors that affect the value of the option from the individual employee s perspective only are not relevant to estimating the price that would be set by a knowledgeable, willing market participant. Inputs to option pricing models B11 In estimating the expected v .....

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likely to be a range of reasonable expectations about future volatility, dividends and exercise behaviour. If so, an expected value should be calculated, by weighting each amount within the range by its associated probability of occurrence. B13 Expectations about the future are generally based on experience, modified if the future is reasonably expected to differ from the past. In some circumstances, identifiable factors may indicate that unadjusted historical experience is a relatively poor pr .....

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ntities are discussed further below. B15 In summary, an entity should not simply base estimates of volatility, exercise behaviour and dividends on historical information without considering the extent to which the past experience is expected to be reasonably predictive of future experience. Expected early exercise B16 Employees often exercise share options early, for a variety of reasons. For example, employee share options are typically non-transferable. This often causes employees to exercise .....

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nto account depends upon the type of option pricing model applied. For example, expected early exercise could be taken into account by using an estimate of the option s expected life (which, for an employee share option, is the period of time from grant date to the date on which the option is expected to be exercised) as an input into an option pricing model (eg the Black-Scholes-Merton formula). Alternatively, expected early exercise could be modelled in a binomial or similar option pricing mod .....

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tstanding in the past. (c) the price of the underlying shares. Experience may indicate that the employees tend to exercise options when the share price reaches a specified level above the exercise price. (d) the employee s level within the organisation. For example, experience might indicate that higher-level employees tend to exercise options later than lower-level employees (discussed further in paragraph B21). (e) expected volatility of the underlying shares. On average, employees might tend .....

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d average lives for subgroups of employees within the group, based on more detailed data about employees exercise behaviour (discussed further below). B20 Separating an option grant into groups for employees with relatively homogeneous exercise behaviour is likely to be important. Option value is not a linear function of option term; value increases at a decreasing rate as the term lengthens. For example, if all other assumptions are equal, although a two-year option is worth more than a one-yea .....

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xample, the experience of an entity that grants options broadly to all levels of employees might indicate that top-level executives tend to hold their options longer than middle-management employees hold theirs and that lower-level employees tend to exercise their options earlier than any other group. In addition, employees who are encouraged or required to hold a minimum amount of their employer s equity instruments, including options, might on average exercise options later than employees not .....

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n on the share over a period of time. Volatility is typically expressed in annualised terms that are comparable regardless of the time period used in the calculation, for example, daily, weekly or monthly price observations. B23 The rate of return (which may be positive or negative) on a share for a period measures how much a shareholder has benefited from dividends and appreciation (or depreciation) of the share price. B24 The expected annualised volatility of a share is the range within which .....

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are paid, the year-end share price would be expected to be between ₹ 83.53 (Rs.100 × e-0.18) and ₹ 152.20 (Rs.100 × e0.42) approximately two-thirds of the time. B25 Factors to consider in estimating expected volatility include: (a) implied volatility from traded share options on the entity s shares, or other traded instruments of the entity that include option features (such as convertible debt), if any. (b) the historical volatility of the share price over the most recen .....

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long-term average level, and other factors indicating that expected future volatility might differ from past volatility. For example, if an entity s share price was extraordinarily volatile for some identifiable period of time because of a failed takeover bid or a major restructuring, that period could be disregarded in computing historical average annual volatility. (e) appropriate and regular intervals for price observations. The price observations should be consistent from period to period. .....

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a newly listed entity does not have sufficient information on historical volatility, it should nevertheless compute historical volatility for the longest period for which trading activity is available. It could also consider the historical volatility of similar entities following a comparable period in their lives. For example, an entity that has been listed for only one year and grants options with an average expected life of five years might consider the pattern and level of historical volatil .....

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could be considered when estimating expected volatility. B29 Alternatively, the entity could consider the historical or implied volatility of similar listed entities, for which share price or option price information is available, to use when estimating expected volatility. This would be appropriate if the entity has based the value of its shares on the share prices of similar listed entities. B30 If the entity has not based its estimate of the value of its shares on the share prices of similar .....

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on whether the counterparty is entitled to dividends or dividend equivalents. B32 For example, if employees were granted options and are entitled to dividends on the underlying shares or dividend equivalents (which might be paid in cash or applied to reduce the exercise price) between grant date and exercise date, the options granted should be valued as if no dividends will be paid on the underlying shares, ie the input for expected dividends should be zero. B33 Similarly, when the grant date fa .....

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rant is estimated, expected dividends should be included in the application of an option pricing model. When the fair value of a share grant is estimated, that valuation should be reduced by the present value of dividends expected to be paid during the vesting period. B35 Option pricing models generally call for expected dividend yield. However, the models may be modified to use an expected dividend amount rather than a yield. An entity may use either its expected yield or its expected payments. .....

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ay dividends and has no plans to do so should assume an expected dividend yield of zero. However, an emerging entity with no history of paying dividends might expect to begin paying dividends during the expected lives of its employee share options. Those entities could use an average of their past dividend yield (zero) and the mean dividend yield of an appropriately comparable peer group. Risk-free interest rate B37 Typically, the risk-free interest rate is the implied yield currently available .....

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interest rate (for example, in high inflation economies). Also, an appropriate substitute should be used if market participants would typically determine the risk-free interest rate by using that substitute, rather than the implied yield of zero-coupon government issues, when estimating the fair value of an option with a life equal to the expected term of the option being valued. Capital structure effects B38 Typically, third parties, not the entity, write traded share options. When these share .....

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he current market price at the date of exercise, this actual or potential dilution might reduce the share price, so that the option holder does not make as large a gain on exercise as on exercising an otherwise similar traded option that does not dilute the share price. B40 Whether this has a significant effect on the value of the share options granted depends on various factors, such as the number of new shares that will be issued on exercise of the options compared with the number of shares al .....

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-settled arrangements B42 Paragraph 27 requires that, irrespective of any modifications to the terms and conditions on which the equity instruments were granted, or a cancellation or settlement of that grant of equity instruments, the entity should recognise, as a minimum, the services received measured at the grant date fair value of the equity instruments granted, unless those equity instruments do not vest because of failure to satisfy a vesting condition (other than a market condition) that .....

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of the amount recognised for services received as consideration for the equity instruments granted. The incremental fair value granted is the difference between the fair value of the modified equity instrument and that of the original equity instrument, both estimated as at the date of the modification. If the modification occurs during the vesting period, the incremental fair value granted is included in the measurement of the amount recognised for services received over the period from the mod .....

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odified equity instruments. (b) similarly, if the modification increases the number of equity instruments granted, the entity shall include the fair value of the additional equity instruments granted, measured at the date of the modification, in the measurement of the amount recognised for services received as consideration for the equity instruments granted, consistently with the requirements in (a) above. For example, if the modification occurs during the vesting period, the fair value of the .....

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xample, by reducing the vesting period or by modifying or eliminating a performance condition (other than a market condition, changes to which are accounted for in accordance with (a) above), the entity shall take the modified vesting conditions into account when applying the requirements of paragraphs 19-21. B44 Furthermore, if the entity modifies the terms or conditions of the equity instruments granted in a manner that reduces the total fair value of the arrangement, or is not otherwise benef .....

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take into account that decrease in fair value and shall continue to measure the amount recognised for services received as consideration for the equity instruments based on the grant date fair value of the equity instruments granted. (b) if the modification reduces the number of equity instruments granted to an employee, that reduction shall be accounted for as a cancellation of that portion of the grant, in accordance with the requirements of paragraph 28. (c) if the entity modifies the vestin .....

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44A If the terms and conditions of a cash-settled transaction are modified with the result that it becomes an equity-settled transaction, the transaction is accounted for as such from the date of the modification. Specifically: (a) The equity-settled transaction is measured by reference to the fair value of the equity instruments granted at the modification date. The equity-settled transaction is recognised in equity on the modification date to the extent to which goods or services have been rec .....

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agraph B44A apply even if the modification occurs after the vesting period. B44C A cash-settled transaction may be cancelled or settled (other than a transaction cancelled by forfeiture when the vesting conditions are not satisfied). If equity instruments are granted and, on that grant date, the entity identifies them as a replacement for the cancelled cash-settled sharebased payment, the entity shall apply paragraphs B44A and B44B.] transactions among group entities B45 Paragraphs 43A-43C addre .....

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saction is a parent s equity contribution to the subsidiary, regardless of any intragroup repayment arrangements. B46 Although the discussion below focuses on transactions with employees, it also applies to similar transactions with suppliers of goods or services other than employees. An arrangement between a parent and its subsidiary may require the subsidiary to pay the parent for the provision of the equity instruments to the employees. The discussion below does not address how to account for .....

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ntity grants to its employees rights to equity instruments of the entity (eg share options), and either chooses or is required to buy equity instruments (ie treasury shares) from another party, to satisfy its obligations to its employees; and (b) an entity s employees are granted rights to equity instruments of the entity (eg share options), either by the entity itself or by its shareholders, and the shareholders of the entity provide the equity instruments needed. B49 The entity shall account f .....

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e entity itself or by its shareholder(s). B50 If the shareholder has an obligation to settle the transaction with its investee s employees, it provides equity instruments of its investee rather than its own. Therefore, if its investee is in the same group as the shareholder, in accordance with paragraph 43C, the shareholder shall measure its obligation in accordance with the requirements applicable to cash-settled transactions in the shareholder s separate financial statements and those applicab .....

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lowing arrangements: (a) a parent grants rights to its equity instruments directly to the employees of its subsidiary: the parent (not the subsidiary) has the obligation to provide the employees of the subsidiary with the equity instruments; and (b) a subsidiary grants rights to equity instruments of its parent to its employees: the subsidiary has the obligation to provide its employees with the equity instruments. A parent grants rights to its equity instruments to the employees of its subsidia .....

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s employees by providing the parent s own equity instruments. Therefore, in accordance with paragraph 43C, the parent shall measure its obligation in accordance with the requirements applicable to equity-settled transactions. A subsidiary grants rights to equity instruments of its parent to its employees (paragraph B52(b)) B55 Because the subsidiary does not meet either of the conditions in paragraph 43B, it shall account for the transaction with its employees as cash-settled. This requirement a .....

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in which the parent (not the entity itself) has an obligation to make the required cash payments to the employees of the entity: (a) the employees of the entity will receive cash payments that are linked to the price of its equity instruments. (b) the employees of the entity will receive cash payments that are linked to the price of its parent s equity instruments. B57 The subsidiary does not have an obligation to settle the transaction with its employees. Therefore, the subsidiary shall accoun .....

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le the transaction with the employees, and the consideration is cash, the parent (and the consolidated group) shall measure its obligation in accordance with the requirements applicable to cash-settled transactions in paragraph 43C. Transfer of employees between group entities B59 The fourth issue relates to group arrangements that involve employees of more than one group entity. For example, a parent might grant rights to its equity instruments to the employees of its subsidiaries, conditional .....

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from the employee by reference to the fair value of the equity instruments at the date the rights to those equity instruments were originally granted by the parent as defined in Appendix A, and the proportion of the vesting period the employee served with each subsidiary. B60 If the subsidiary has an obligation to settle the transaction with its employees in its parent s equity instruments, it accounts for the transaction as cash-settled. Each subsidiary shall measure the services received on t .....

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re completing the service period. In this case, because the vesting condition is service to the group, each subsidiary shall adjust the amount previously recognised in respect of the services received from the employee in accordance with the principles in paragraph 19. Hence, if the rights to the equity instruments granted by the parent do not vest because of an employee s failure to meet a vesting condition other than a market condition, no amount is recognised on a cumulative basis for the ser .....

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portions related thereto have not been given in Ind AS 102, since all transitional provisions related to Indian ASs, wherever considered appropriate, have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards. 2. Cross-reference to paragraphs B1-B4 of IFRS 3 contained in paragraph 5 of IFRS 2 has been modified as cross-reference to Appendix C of Ind AS 103 in paragraph 5 of Ind A .....

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luded in Ind AS 102 as these paragraphs relate to Transitional Provisions and Effective date, respectively. However, in order to maintain consistency with paragraph numbers of IFRS 2, the paragraph numbers are retained in Ind AS 102. ] Also see in PDF Indian Accounting Standard (Ind AS) 102 - Notes:- 1. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 17-3-2017 w.e.f. 1st day of April, 2017, before it was read as, "19 A grant of equity instruments might be conditional upon satisfyin .....

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ares or share options at the measurement date. Instead, vesting conditions shall be taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised for goods or services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Hence, on a cumulative basis, no amount is recognised for goods or services received if the equity .....

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fair value of the liability. Until the liability is settled, the entity shall remeasure the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognised in profit or loss for the period." 3. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 17-3-2017 w.e.f. 1st day of April, 2017, before it was read as, "31 For example, an entity might grant share appreciation rights to employees as part of their remuner .....

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