ICAI issues Guidance Note on Accounting for Share-based Payments [Read Guidance Note]

ICAI issues Guidance Note on Accounting for Share-based Payments [Read Guidance Note]

CA - ICAI - Guidance Note - Accounting for Share-based Payments - Taxscan

The Institute of Chartered Accountants of India (ICAI) has issued a Guidance Note on Accounting for Share-based Payments.

The Institute has issued a Guidance Note to provide uniform accounting principles and practices for all types of share-based payments for the companies following Accounting Standards under Companies (Accounting Standards) Rules, 2006, as amended under Section 133 of Companies Act, 2013.

As per the Guidance Note, a share-based payment can be accounted for by adopting the fair value method or the intrinsic value method.

This Guidance Note establishes financial accounting and reporting principles for share-based payment plans, including., ESOPs, ESPPs, and SARs as well as share-based payment arrangements with non-employees. For the purposes of this Guidance Note, the term ‘employee’ includes a director of the enterprise, whether the whole time or not.

The Guidance note said that the recent time has witnessed a rise in the number of transactions involving share-based payments. Globally, employers use share-based payments as a part of remuneration packages for their employees, a practice adopted by many companies in India.

Apart from using share-based payments to compensate employees for their services, such payments are also used by employers to incentivize their employees to reward them for their efforts in improving its performance and remain committed to the Company.

“Several companies also offer share-based payments to non-employees, including vendors. The concept of share-based payments is broader than employee share options. Indian Accounting Standard 102 covers the share-based payments to non-employees also. Recognizing the need for establishing uniform accounting principles and practices for all types of share-based payments for the companies following Accounting Standards under Companies (Accounting Standards) Rules, 2006, as amended under Section 133 of Companies Act, 2013, it is heartening to note that the Research Committee of the Institute has come out with this ‘Guidance Note on Accounting for Share-based Payments’,” the ICAI President, CA Atul Kumar Gupta said.

For full text of the Guidance Note, Click here.

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