Delving into IFRIC 11: Group and Treasury Share Transactions under IFRS 2

IFRIC Interpretation 11 (IFRIC 11), "IFRS 2 – Group and Treasury Share Transactions," provides guidance on certain types of share-based payment transactions within a group, particularly those involving treasury shares. It clarifies how to apply IFRS 2 "Share-based Payment" to transactions in which an entity receives goods or services as consideration for its own equity instruments or those of another entity in the same group (including equity of its parent).

Key aspects of IFRIC 11 include:

1. Scope of IFRIC 11: IFRIC 11 applies to transactions involving share-based payments within a group, such as when an employee of a subsidiary is granted rights to equity instruments of the parent or when transactions involve treasury shares.

2. Transactions with Employees of Subsidiaries: The interpretation provides guidance on accounting for transactions in which the parent grants rights to its equity instruments directly to the employees of its subsidiaries. It clarifies that such transactions should be treated as equity-settled share-based payment transactions in the consolidated financial statements. The subsidiary that receives the employee services should recognize a corresponding increase in equity with a related expense in its financial statements.

3. Transactions with Treasury Shares: When an entity grants rights to its equity instruments and the entity or its subsidiary buys treasury shares to settle the share-based payment transactions, IFRIC 11 clarifies that the payment should be treated as an equity-settled transaction, and the purchase of treasury shares should not affect the accounting for the share-based payment.

4. Measurement and Recognition: The measurement and recognition of these transactions should be consistent with IFRS 2, which generally requires such transactions to be measured at the fair value of the goods or services received.

5. Disclosure Requirements: Entities are required to disclose information about the nature and extent of these types of share-based payment transactions, consistent with the disclosure requirements of IFRS 2.

IFRIC 11 helps ensure that entities apply IFRS 2 correctly to complex share-based payment arrangements involving multiple entities within a group, particularly when dealing with equity instruments of the parent or treasury shares. This interpretation is crucial for providing clarity and consistency in accounting for group share-based payment transactions, ensuring that the financial statements reflect the economic substance of these transactions.

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