Page 1 of 4Our Ref.: C/FRSCSent electronically through the IASB Website (www.ifrs.org)
30 March 2015Mr. Hans HoogervorstInternational Accounting Standards Board30 Cannon StreetLondon EC4M 6XHUnited KingdomDear Hans,IASB Exposure Draft ED/2014/5Classification and Measurement of Share-based Payment TransactionsThe Hong Kong Institute of Certified Public Accountants is the only body authorised bylaw to promulgate financial reporting, auditing and ethical standards for professionalaccountants in Hong Kong. We welcome the opportunity to comment on this ExposureDraft (ED).We are grateful for the IASB's efforts to reduce diversity in practice, and support theamendments to IFRS 2 Share-based Payment as proposed in this ED.While we agree with prospective application of the amendments proposed in this ED byhaving considered the efforts required for retrospective application, we recommend thatthe IASB should provide guidance on how to apply the proposed amendmentsprospectively.Our detailed response to the questions raised in the ED is set out in the Appendix for yourconsideration.If you have any questions regarding the matters raised in our comment letter, pleasecontact me or Ben Lo, Associate Director of the Institute's Standard Setting Department,at ben@hkicpa.org.hk.Yours faithfully,Christina NgHead of Financial ReportingHong Kong Institute of Certified Public AccountantsCN/BLEncl.Page 2 of 4APPENDIXDetailed comments on IASB Exposure Draft ED/2014/5 Classification andMeasurement of Share-based Payment TransactionsQuestion 1The IASB proposes to clarify that accounting for the effects of vesting and non-vesting conditions on the measurement of a cash-settled share-based paymentshould follow the approach used for measuring equity-settled share-basedpayments in paragraphs 19 - 21A of IFRS 2.Do you agree? Why or why not?We support the IASB's proposal to provide guidance on the accounting for the effectsof vesting and non-vesting conditions on the measurement of a cash-settled share-based payment. We also agree with the proposed clarification in this ED that wouldresult in consistent application of IFRS 2 to both equity-settled and cash-settled share-based payments.However, the Institute notes that the wording in paragraphs BC 244 - BC 245 of IFRS 2is not consistent with the proposed guidance. That is, paragraphs BC 244 - BC 245 ofIFRS 2 imply that a liability should be recognised during the vesting period to theextent that employees have performed services even though there is a possibility thatthe benefit may not vest, whereas the proposed IG Example 12A illustrates that noexpense would be recognised in Year 1 as the probability of achieving the revenuetarget is only 40%.The Institute recommends that the IASB amends the wording in paragraphs BC 244 -BC 245 of IFRS 2 to be consistent with the proposed IG Example 12A.Question 2The IASB proposes to specify that a share-based payment transaction in whichthe entity settles the share-based payment arrangement net by withholding aspecified portion of the equity instruments to meet the statutory tax withholdingobligation should be classified as equity-settled in its entirety. This is required ifthe entire share-based payment transaction would otherwise have beenclassified as an equity-settled share-based payment transaction if it had notincluded the net settlement feature.Do you agree? Why or why not?While we prefer to keep IFRSs as principles-based standards, we can understand thepractical difficulties in apportioning each component of an equity-settled share-basedpayment arrangement with a net settlement feature in a manner that is consistent withthe manner of settlement. Moreover, if we were to take View 1 of BC 10 of the ED (thatis, to apportion each component), an entity would be required to estimate changes intax laws, including changes in tax rates, that affect the amount that is required to bewithheld and remitted by the entity and, as estimated inputs change, the entity wouldneed to reclassify a portion of the share-based payment between cash-settled andequity-settled.Page 3 of 4We also agree with the view contained in paragraph BC12 of the ED that 'the entity isacting as an agent in paying cash to the taxation authorities, because the tax obligationis the employee's obligation'.Accordingly, we are prepared to support the view contained in paragraph BC 15 of theED, which is to reduce operational complexity.Question 3The IASB proposes to specify the accounting for modifications to the terms andconditions of a cash-settled share-based payment transaction that results in achange in its classification from cash-settled to equity-settled. The IASBproposes that these transactions should be accounted for in the followingmanner:
(a) the share-based payment transaction is measured by reference to themodification-date fair value of the equity instruments granted as a result ofthe modification;
(b) the liability recognised in respect of the original cash-settled share-basedpayment is derecognised upon the modification, and the equity-settled share-based payment is recognised to the extent that the services have beenrendered up to the modification date; and(c) the difference between the carrying amount of the liability as at themodification date and the amount recognised in equity at the same date isrecorded in profit or loss immediately.Do you agree? Why or why not?We support the view contained in paragraph BC19 of the ED, which states that themodification to the terms and conditions of a cash-settled share-based paymenttransaction that results in a change in its classification from cash-settled to equity-settled, is considered as a settlement of the original cash-settled share-based paymentby the granting of a new equity-settled share-based payment. We think that insubstance, a new transaction has been created and the balances relating to the earliertransaction should be de-recognised. Accordingly, we agree with the proposedamendment that the replacement awards should be measured by reference to themodification-date fair value of the equity instruments granted. This proposal would alsobe consistent with the grant-date approach for equity-settled share-based payment.We also support the IASB's proposal that any difference between the carrying amountof the liability as at the modification date and the amount recognised in equity at thesame date would be recorded in profit or loss immediately. This would be consistentwith the accounting treatment for the extinguishment of liabilities as the magnitude ofchange is considered as significant. However, as some may be confused as to how toattribute unvested amounts between services provided in the past and services to beprovided in the future, we recommend that the IASB adds an illustrative example toillustrate the accounting at the modification date, as well as the subsequent accountinguntil the vesting of the equity-settled share-based payment.Page 4 of 4Question 4The IASB proposes prospective application of these amendments, but alsoproposes to permit the entity to apply the amendments retrospectively if it hasthe information needed to do so and this information is available without the useof hindsight.Do you agree? Why or why not?Having considered the efforts required for retrospective application, we supportapplying these proposed amendments prospectively.However, we recommend that the IASB clarifies how to apply the proposedamendments prospectively. For example, should the proposed amendments apply tonew share-based transactions only or to both new and existing share-basedtransactions? For the amendment that relates to modification of a share-basedtransaction from cash-settled to equity-settled, we believe the amendment shouldapply only to modifications that take place after the amendment comes into effect (thatis, 'new' modifications).The Institute also thinks that the IASB should consider developing consistent core'principles' for transitional provisions of new standards and amendments to existingstandards. If the IASB considers that the default 'retrospective' application does notwork in practice due to cost or any other reasons, perhaps 'prospective' applicationwith additional disclosure on the impact of the proposed or new requirements tocomparative amounts should become a default principle for transitional provisions.Question 5Do you have any other comments on the proposals?We do not have any other comments.~ End ~
Institute comments on IASB Exposure Draft ED/2014/5 Classification and Measurement of Share-based Payment Transactions
下载原件Page 1 of 4Our Ref.: C/FRSCSent electronically through the IASB Website (www.ifrs.org)
30 March 2015Mr. Hans HoogervorstInternational Accounting Standards Board30 Cannon StreetLondon EC4M 6XHUnited KingdomDear Hans,IASB Exposure Draft ED/2014/5Classification and Measurement of Share-based Payment TransactionsThe Hong Kong Institute of Certified Public Accountants is the only body authorised bylaw to promulgate financial reporting, auditing and ethical standards for professionalaccountants in Hong Kong. We welcome the opportunity to comment on this ExposureDraft (ED).We are grateful for the IASB's efforts to reduce diversity in practice, and support theamendments to IFRS 2 Share-based Payment as proposed in this ED.While we agree with prospective application of the amendments proposed in this ED byhaving considered the efforts required for retrospective application, we recommend thatthe IASB should provide guidance on how to apply the proposed amendmentsprospectively.Our detailed response to the questions raised in the ED is set out in the Appendix for yourconsideration.If you have any questions regarding the matters raised in our comment letter, pleasecontact me or Ben Lo, Associate Director of the Institute's Standard Setting Department,at ben@hkicpa.org.hk.Yours faithfully,Christina NgHead of Financial ReportingHong Kong Institute of Certified Public AccountantsCN/BLEncl.Page 2 of 4APPENDIXDetailed comments on IASB Exposure Draft ED/2014/5 Classification andMeasurement of Share-based Payment TransactionsQuestion 1The IASB proposes to clarify that accounting for the effects of vesting and non-vesting conditions on the measurement of a cash-settled share-based paymentshould follow the approach used for measuring equity-settled share-basedpayments in paragraphs 19 - 21A of IFRS 2.Do you agree? Why or why not?We support the IASB's proposal to provide guidance on the accounting for the effectsof vesting and non-vesting conditions on the measurement of a cash-settled share-based payment. We also agree with the proposed clarification in this ED that wouldresult in consistent application of IFRS 2 to both equity-settled and cash-settled share-based payments.However, the Institute notes that the wording in paragraphs BC 244 - BC 245 of IFRS 2is not consistent with the proposed guidance. That is, paragraphs BC 244 - BC 245 ofIFRS 2 imply that a liability should be recognised during the vesting period to theextent that employees have performed services even though there is a possibility thatthe benefit may not vest, whereas the proposed IG Example 12A illustrates that noexpense would be recognised in Year 1 as the probability of achieving the revenuetarget is only 40%.The Institute recommends that the IASB amends the wording in paragraphs BC 244 -BC 245 of IFRS 2 to be consistent with the proposed IG Example 12A.Question 2The IASB proposes to specify that a share-based payment transaction in whichthe entity settles the share-based payment arrangement net by withholding aspecified portion of the equity instruments to meet the statutory tax withholdingobligation should be classified as equity-settled in its entirety. This is required ifthe entire share-based payment transaction would otherwise have beenclassified as an equity-settled share-based payment transaction if it had notincluded the net settlement feature.Do you agree? Why or why not?While we prefer to keep IFRSs as principles-based standards, we can understand thepractical difficulties in apportioning each component of an equity-settled share-basedpayment arrangement with a net settlement feature in a manner that is consistent withthe manner of settlement. Moreover, if we were to take View 1 of BC 10 of the ED (thatis, to apportion each component), an entity would be required to estimate changes intax laws, including changes in tax rates, that affect the amount that is required to bewithheld and remitted by the entity and, as estimated inputs change, the entity wouldneed to reclassify a portion of the share-based payment between cash-settled andequity-settled.Page 3 of 4We also agree with the view contained in paragraph BC12 of the ED that 'the entity isacting as an agent in paying cash to the taxation authorities, because the tax obligationis the employee's obligation'.Accordingly, we are prepared to support the view contained in paragraph BC 15 of theED, which is to reduce operational complexity.Question 3The IASB proposes to specify the accounting for modifications to the terms andconditions of a cash-settled share-based payment transaction that results in achange in its classification from cash-settled to equity-settled. The IASBproposes that these transactions should be accounted for in the followingmanner:
(a) the share-based payment transaction is measured by reference to themodification-date fair value of the equity instruments granted as a result ofthe modification;
(b) the liability recognised in respect of the original cash-settled share-basedpayment is derecognised upon the modification, and the equity-settled share-based payment is recognised to the extent that the services have beenrendered up to the modification date; and(c) the difference between the carrying amount of the liability as at themodification date and the amount recognised in equity at the same date isrecorded in profit or loss immediately.Do you agree? Why or why not?We support the view contained in paragraph BC19 of the ED, which states that themodification to the terms and conditions of a cash-settled share-based paymenttransaction that results in a change in its classification from cash-settled to equity-settled, is considered as a settlement of the original cash-settled share-based paymentby the granting of a new equity-settled share-based payment. We think that insubstance, a new transaction has been created and the balances relating to the earliertransaction should be de-recognised. Accordingly, we agree with the proposedamendment that the replacement awards should be measured by reference to themodification-date fair value of the equity instruments granted. This proposal would alsobe consistent with the grant-date approach for equity-settled share-based payment.We also support the IASB's proposal that any difference between the carrying amountof the liability as at the modification date and the amount recognised in equity at thesame date would be recorded in profit or loss immediately. This would be consistentwith the accounting treatment for the extinguishment of liabilities as the magnitude ofchange is considered as significant. However, as some may be confused as to how toattribute unvested amounts between services provided in the past and services to beprovided in the future, we recommend that the IASB adds an illustrative example toillustrate the accounting at the modification date, as well as the subsequent accountinguntil the vesting of the equity-settled share-based payment.Page 4 of 4Question 4The IASB proposes prospective application of these amendments, but alsoproposes to permit the entity to apply the amendments retrospectively if it hasthe information needed to do so and this information is available without the useof hindsight.Do you agree? Why or why not?Having considered the efforts required for retrospective application, we supportapplying these proposed amendments prospectively.However, we recommend that the IASB clarifies how to apply the proposedamendments prospectively. For example, should the proposed amendments apply tonew share-based transactions only or to both new and existing share-basedtransactions? For the amendment that relates to modification of a share-basedtransaction from cash-settled to equity-settled, we believe the amendment shouldapply only to modifications that take place after the amendment comes into effect (thatis, 'new' modifications).The Institute also thinks that the IASB should consider developing consistent core'principles' for transitional provisions of new standards and amendments to existingstandards. If the IASB considers that the default 'retrospective' application does notwork in practice due to cost or any other reasons, perhaps 'prospective' applicationwith additional disclosure on the impact of the proposed or new requirements tocomparative amounts should become a default principle for transitional provisions.Question 5Do you have any other comments on the proposals?We do not have any other comments.~ End ~