What is Share-Based Payment?
A share-based payment is a transaction in which a business receives goods or services in exchange for its own equity instruments, or for cash based on the value of its equity instruments. The transaction is accounted for under IFRS 2.
How It Works
- Classify the payment as equity-settled or cash-settled.
- Measure equity-settled awards at the fair value of the equity instruments granted at the grant date.
- Spread the expense over the vesting period in proportion to services received.
- Re-measure cash-settled awards at fair value at each reporting date through profit or loss.
- Adjust for vesting conditions — service, performance, market — per IFRS 2.
Saudi Context
Saudi listed companies on Tadawul issue Long-Term Incentive Plans (LTIPs) to senior executives and key employees, often as restricted share units. SOCPA-adopted IFRS 2 governs accounting, and ZATCA reviews the deductibility of the expense for tax and zakat purposes.
Example
A company grants 100,000 share options with a grant-date fair value of SAR 20 each that vest over 4 years. Total IFRS 2 expense = SAR 2,000,000 spread over four years at SAR 500,000 per year, subject to forfeiture estimates.