What is Cash-Settled Share-Based Award?
A cash-settled share-based payment award gives the employee a cash payment whose amount is based on the value of the employer’s shares, rather than the shares themselves. Under IFRS 2, it is recognized as a liability and remeasured to fair value at each reporting date, with changes going through profit or loss.
How It Works
- Recognize a liability equal to the fair value of services received.
- Remeasure the liability at each reporting date and at settlement.
- Run the change in fair value through profit or loss.
- Settle in cash on vesting or exercise.
Saudi Context
Saudi private companies, where shares are illiquid, often prefer cash-settled phantom share plans so employees can benefit from share value appreciation without owning equity.
Example
A SAR 100 phantom share vests after three years. If the share price doubles, the company pays the employee SAR 200 in cash.