Buacc5934 Financial Management Assignment
BUACC5934 FINANCIAL MANAGEMENT | AASB2 Share Based Payments | Major Assignment Summer Semester 2013 | Prepared by | Hide | | |
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PART A:
Discuss the following in relation to the standard:
1. What was the rationale for the introduction of an accounting standard covering share based transactions?
The share-based transaction, such as share options for employees, was not attributed a cost in the past although the use of such equity instruments was widespread. As a result, the AASB 2 Share-based Payment was introduced to force entities to incur a cost the transaction. Moreover, the treatment of share-based payment transactions was very controversy before 2005 which made inter-firm comparison difficult. So the introduction of an accounting standard has become necessary to cover this issue.
2. Referring to the standard answer the following question:
a) Does a share based payment arrangements always relate to employees?
No. It is very common that entities usually use share options for the purpose of employee remuneration. However the scope of the standard is much broader than this. Under AASB 2, the definition of share-based payment transaction indicates that a share-based payment arrangement only requires the exchange of goods or services or incurs an obligation to settle the transaction with the supplier when another group entity receives those goods or services. Consequently, the common share-based payment arrangements are not only related to employees but also related to external consultants or suppliers or shareholders.
b) When are transactions with employees outside the scope of AASB 2?
It is not related to the receipt of goods or services; or the amount paid to the employee is not based on the market price of that entity’s equity instruments.
An entity makes a rights issue of shares to all shareholders, including employees who are shareholders. The transaction is an arrangement with employees in their capacity
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PART A:
Discuss the following in relation to the standard:
1. What was the rationale for the introduction of an accounting standard covering share based transactions?
The share-based transaction, such as share options for employees, was not attributed a cost in the past although the use of such equity instruments was widespread. As a result, the AASB 2 Share-based Payment was introduced to force entities to incur a cost the transaction. Moreover, the treatment of share-based payment transactions was very controversy before 2005 which made inter-firm comparison difficult. So the introduction of an accounting standard has become necessary to cover this issue.
2. Referring to the standard answer the following question:
a) Does a share based payment arrangements always relate to employees?
No. It is very common that entities usually use share options for the purpose of employee remuneration. However the scope of the standard is much broader than this. Under AASB 2, the definition of share-based payment transaction indicates that a share-based payment arrangement only requires the exchange of goods or services or incurs an obligation to settle the transaction with the supplier when another group entity receives those goods or services. Consequently, the common share-based payment arrangements are not only related to employees but also related to external consultants or suppliers or shareholders.
b) When are transactions with employees outside the scope of AASB 2?
It is not related to the receipt of goods or services; or the amount paid to the employee is not based on the market price of that entity’s equity instruments.
An entity makes a rights issue of shares to all shareholders, including employees who are shareholders. The transaction is an arrangement with employees in their capacity