Commission Regulation (EC) No 1261/2008 of 16 December 2008 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard (IFRS) 2 (Text with EEA relevance)
OJ L 338, 17.12.2008, p. 17–20 (BG, ES, CS, DA, DE, ET, EL, EN, FR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)
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Commission Regulation (EC) No 1261/2008
of 16 December 2008
amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard (IFRS) 2
(Text with EEA relevance)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community,
Having regard to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards , and in particular Article 3(1) thereof,
(1) By Commission Regulation (EC) No 1126/2008  certain international accounting standards and interpretations that were extant at 15 October 2008 were adopted.
(2) On 17 January 2008, the International Accounting Standards Board (IASB) published Amendments to International Financial Reporting Standard (IFRS) 2 Share-based payment, hereinafter "amendment to IFRS 2". The amendment to IFRS 2 provides clarification on what are vesting conditions, how to account for non-vesting conditions and how to account for cancellations of a share-based payment arrangement by the entity or the counterparty.
(3) The consultation with the Technical Expert Group (TEG) of the European Financial Reporting Advisory Group (EFRAG) confirms that the amendment to IFRS 2 meets the technical criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002. In accordance with Commission Decision 2006/505/EC of 14 July 2006 setting up a Standards Advice Review Group to advise the Commission on the objectivity and neutrality of the European Financial Reporting Advisory Group’s (EFRAG’s) opinions , the Standards Advice Review Group considered EFRAG’s opinion on endorsement and advised the European Commission that it is well balanced and objective.
(4) Regulation (EC) No 1126/2008 should therefore be amended accordingly.
(5) The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee,
HAS ADOPTED THIS REGULATION:
In the Annex to Regulation (EC) No 1126/2008 International Financial Reporting Standard IFRS 2 Share-based payment is amended in accordance with the Amendments to International Financial Reporting Standard IFRS 2 Share-based payment, hereinafter "amendment to IFRS 2", as set out in the Annex to this Regulation.
Each company shall apply the amendment to IFRS 2, as set out in the Annex to this Regulation, at the latest, as from the commencement date of its first financial year starting after 31 December 2008.
This Regulation shall enter into force on the third day following its publication in the Official Journal of the European Union.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 16 December 2008.
For the Commission
Member of the Commission
 OJ L 243, 11.9.2002, p. 1.
 OJ L 320, 29.11.2008, p. 1.
 OJ L 199, 21.7.2006, p. 33.
INTERNATIONAL ACCOUNTING STANDARDS
IFRS 2 | "Amendment to IFRS 2 Share-based payment" |
Reproduction allowed within the European Economic Area. All existing rights reserved outside the EEA, with the exception of the right to reproduce for the purposes of personal use or other fair dealing. Further information can be obtained from the IASB at www.iasb.org
AMENDMENTS TO IFRS 2
This document sets out amendments to IFRS 2 Share-based Payment. The amendments finalise the proposals that were contained in the exposure draft of proposed amendments to IFRS 2 — Vesting Conditions and Cancellations published in February 2006.
Entities shall apply these amendments to all share-based payments within the scope of IFRS 2 for annual periods beginning on or after 1 January 2009. Earlier application is permitted.
In the Standard, after paragraph 21, a heading and paragraph 21A are added as follows.
"Treatment of non-vesting conditions
21A Similarly, an entity shall take into account all non-vesting conditions when estimating the fair value of the equity instruments granted. Therefore, for grants of equity instruments with non-vesting conditions, the entity shall recognise the goods or services received from a counterparty that satisfies all vesting conditions that are not market conditions (e.g. services received from an employee who remains in service for the specified period of service), irrespective of whether those non-vesting conditions are satisfied."
In the Standard, paragraph 28 is amended as follows.
"28 If a grant of equity instruments is cancelled or settled during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied) …"
In the Standard, paragraph 28(b) is amended as follows.
"28 (b) … Any such excess shall be recognised as an expense. However, if the share-based payment arrangement included liability components, the entity shall remeasure the fair value of the liability at the date of cancellation or settlement. Any payment made to settle the liability component shall be accounted for as an extinguishment of the liability."
In the Standard, after paragraph 28, paragraph 28A is added as follows.
"28A If an entity or counterparty can choose whether to meet a non-vesting condition, the entity shall treat the entity’s or counterparty’s failure to meet that non-vesting condition during the vesting period as a cancellation."
In the Standard, paragraph 62 is added as follows.
"62 An entity shall apply the following amendments retrospectively in annual periods beginning on or after 1 January 2009:
(a) the requirements in paragraph 21A in respect of the treatment of non-vesting conditions;
(b) the revised definitions of "vest" and "vesting conditions" in Appendix A;
(c) the amendments in paragraphs 28 and 28A in respect of cancellations.
Earlier application is permitted. If an entity applies these amendments for a period beginning before 1 January 2009, it shall disclose that fact."
In Appendix A, the definitions of "vest" and "vesting conditions" are amended as follows.
"vest To become an entitlement. Under a share-based payment arrangement, a counterparty’s right to receive cash, other assets or equity instruments of the entity vests when the counterparty’s entitlement is no longer conditional on the satisfaction of any vesting conditions.
vesting conditions The conditions that determine whether the entity receives the services that entitle the counterparty to receive cash, other assets or equity instruments of the entity, under a share-based payment arrangement. Vesting conditions are either service conditions or performance conditions. Service conditions require the counterparty to complete a specified period of service. Performance conditions require the counterparty to complete a specified period of service and specified performance targets to be met (such as a specified increase in the entity’s profit over a specified period of time). A performance condition might include a market condition."