What is Equity-Settled Share-Based Award?
An equity-settled share-based payment award gives the employee actual shares or options to acquire shares in the employer. Under IFRS 2, the expense is measured at grant date fair value and recognized over the vesting period, with a corresponding increase in equity rather than a liability.
How It Works
- Measure fair value of the equity instruments at grant date.
- Recognize the expense over the vesting period.
- Credit equity (not a liability) as the offsetting entry.
- Do not remeasure for subsequent share price changes.
Saudi Context
Saudi listed companies prefer equity-settled awards because they align employees with shareholders without consuming cash, and Tadawul disclosure rules give a clear path for recognition.
Example
A company grants 1,000 share options worth SAR 25 each at grant date. Total cost of SAR 25,000 is expensed over the three-year vesting period as SAR 8,333 per year.