Summary of IFRIC 11
IFRIC 11 provides guidance on applying IFRS 2 in three circumstances:
Share-based payment involving an entity's own equity instruments in which the entity chooses or is required to buy its own equity instruments (treasury shares) to settle the share-based payment obligation - is this an equity-settled or cash-settled transaction? A parent grants rights to its equity instruments to employees of its subsidiary – how to account in the individual entities' financial statements? A subsidiary grants rights to equity instruments of its parent to its employees – how to account in the individual entities' financial statements?
Share-based payment involving an entity's own equity instruments in which the entity chooses or is required to buy its own equity instruments (treasury shares) to settle the share-based payment obligation
These should always be accounted for as equity-settled share-based payment transactions under IFRS 2.
A parent grants rights to its equity instruments to employees of its subsidiary
Assuming the transaction is accounted for as equity-settled in the consolidated financial statements, the subsidiary must measure the services received using the requirements for equity-settled transactions in IFRS 2, and must recognise a corresponding increase in equity as a contribution from the parent.
A subsidiary grants rights to equity instruments of its parent to its employees
The subsidiary accounts for the transaction as a cash-settled share-based payment transaction.
Therefore, in the subsidiary's individual financial statements, the accounting treatment of transactions in which a subsidiary's employees are granted rights to equity instruments of its parent would differ, depending on whether the parent or the subsidiary granted those rights to the subsidiary's employees. This is because the IFRIC concluded that, in the former situation, the subsidiary has not incurred a liability to transfer cash or other assets of the entity to its employees, whereas it has incurred such a liability in the latter situation (being a liability to transfer equity instruments of its parent).
Effective date
IFRIC 11 is effective for annual periods beginning on or after 1 March 2007. Earlier application is permitted.