Audit & Assurance

Classification Of Share Based Payment Transactions.

No the AASB 2016-15 is not the latest assault weapon on the market, nor is it the latest version of a new computer game to hit our children’s bedrooms. The amending standard AASB 2016-5 is the clarification standard made to AASB 2 Share-Based Payments to clarify the classification and measurement of share-based payment transactions.

Now we have your interest, do these amendments affect you and your business and why are these amendments important?

Firstly it is important to understand what share-based payment (SBP) transactions are in following Australian accounting standards.


In simple terms, a SBP transaction is a payment made in shares, share options, or other assets for the supply of goods or services by a supplier or employee.

Once certain conditional requirements are met (also called vesting conditions) the liability of the payment is calculated at “fair value”.

In some SBP transactions, settlement of this liability would occur via the transfer of equity instruments. This is referred to as an equity settled SBP transaction.

In other SBP transactions, settlement of the liability occurs via the transfer of cash or other assets to the supplier of those goods or services for amounts that are based on the price (or value) of equity instruments of the entity. This is referred to as a cash-settled SBP transaction.


This Standard amends AASB 2 Share-based Payment to address diversity in practice.

Estimation of Fair Value

The amendment clarifies that the fair value of a cash-settled award is determined on a basis consistent with that used for equity-settled awards.

In practice, there has been a degree of subjectivity and interpretation as to what constitutes “fair value” when referring to market-based and non-market-based conditions. The amendment clarifies that non-market and service vesting conditions are ignored in the measurement of fair value. This means that company achievements such as producing a target number of units or products in a financial year (non-market), or an employee reaching a sales target (service achievements) are not used when estimating the ‘fair value’ of a transaction.

Classification of SBP transactions with tax withholding obligations

Some organisations may split an SBP transaction into a cash-settled component for the tax payment and an equity-settled component for the net shares issued to the employee.

The amendment adds an exception that requires the transaction to be treated as equity-settled in its entirety.   

Does this affect you?

If you are an entity that has employee share-based payments then you will need to consider these amendments and if they will affect your accounting processes. In particular, entities with the following arrangements are likely to be affected:

  • Cash settled share-based payments that include performance conditions (service vesting condition),
  • Equity settled awards that include net settlement features relating to tax obligations,
  • Cash settled arrangements that are modified to equity settled share-based payments,
  • Any entity implementing employee –SBP remuneration incentive schemes may also need to consider the impact of this amendment, as well as the original standard of SBP under AASB 2.
  • Non-current assets held are not counted.

How can Bishop Collins help?

If you are still following, you are most likely to be someone who has some knowledge of SBP and are wondering how to navigate around the amendments of AASB 2016-5. Naturally, updates and amendments to tax policies can be challenging for even the most proficient business – so to avoid making any mistakes, why not get further insights in easy-to-understand Terms.

Bishop Collins can steer you through the detailed requirements of SBP standards. We know it can be a complicated topic, but as experts in this field we can assist by:

  • Providing training sessions to gain an awareness of the new standards;
  • Facilitating reviews of existing and proposed accounting protocols;
  • Undertaking an assessment of how SBPs might affect your business; and
  • Drafting accounting policies.

To get more help in navigating and completing the requirements of SBP and the recent amendments, please feel free to contact our experienced team today at (02) 4353 2333 or email us at [email protected] and one of our professionals will be in touch with you

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