TFRS 2, ‘Share-based Payment’

Accounting for share-based payments under TFRS 2 is complex. In this article we look at one common scenario involving a performance related share incentive granted to the company’s management.

Keywords: Mazars, Thailand, Accounting, TFRS 2, Share-based Payment, FAP

10 August 2018


On 1 January 2017, ABC Company granted 15,000 share options to each of the company’s five members of management at that time, subject to the management being employed on 31 December 2020 and that they are able to increase the earnings per share of the company by at least 5 percent every year. The options are to vest on 31 December 2020. However, the options will only vest if the company’s share price is at least THB 120 per share on that date.

The fair value of each share option on 1 January 2017, the grant date, was calculated to be THB 100.

In the year ended 31 December 2017 the company increased its earnings per share by more than 5 percent. The share price was THB 95, and was not forecast to rise over the next three years. It was now expected that only four of the members of management would be working for the company on 31 December 2020.


How should the share options be treated in the financial statements for the year ended 31 December 2017?


The share options are an equity-settled award. The company measures the fair value of services received and recognises a corresponding increase in equity.

This scenario contains:

▪ a non-market service condition – completing a specified period of employment;

▪ a market performance condition – the value of the shares on vesting date; and

▪ a non-market performance condition – an increase in the earnings per share.

Market vesting conditions are only taken into account when estimating the fair value of the award at the grant date.

Non-market vesting conditions are taken into account by subsequently adjusting the number of equity instruments included in the measurement of the transaction amount so as to reflect the number of awards that are expected to vest.

On 31 December 2017 the options will be treated as follows:

15,000 options x 4 directors x THB 100 x 1 year / 4 years = THB 1,500,000.

The accounting entry will be recorded as:

Dr Expense THB 1,500,000

Cr Equity THB 1,500,000

References: and manual guidelines of TFRS 2 ‘Share-based payment’ promulgated by the Federation of Accounting Professions (FAP).