IFRS 2 Part 7: Disclosures, a Full Worked Example and Downloadable Valuation Templates
Part 7 of a 7-part series on IFRS 2: disclosure requirements, a complete worked example combining equity-settled, cash-settled and performance-rights awards, and downloadable Excel valuation templates.
Quick Summary
- IFRS 2 requires three broad categories of disclosure: the nature and extent of arrangements in place, how fair value was determined, and the effect of share-based payments on the entity’s profit or loss and financial position.
- A full worked example below ties together an equity-settled option grant, a cash-settled SAR, and a performance-rights award with a non-market condition, in a single entity’s financial statements.
- Three downloadable Excel templates are provided at the end of this Part — for share, option, and performance-rights valuation — plus a combined expense-recognition register, all built with live formulas so you can substitute your own numbers directly.
SHARE-BASED PAYMENT — 7 GUIDES
Disclosure Requirements
IFRS 2 requires disclosures sufficient for users of the financial statements to understand three things: the nature and extent of share-based payment arrangements during the period, how the fair value of goods or services received (or the equity instruments granted) was determined, and the effect of share-based payment transactions on the entity’s profit or loss and financial position.
Nature and Extent of Arrangements
- A description of each type of arrangement, including general terms and conditions — vesting requirements, the maximum term of options granted, and the method of settlement.
- A reconciliation of the number and weighted average exercise prices of share options outstanding at the beginning and end of the period, showing options granted, forfeited, exercised, and expired during the period, and the number exercisable at period end.
- For options exercised during the period, the weighted average share price at the date of exercise.
- For options outstanding at period end, the range of exercise prices and weighted average remaining contractual life.
How Fair Value Was Determined
- The option-pricing model used and the inputs to that model — expected volatility, expected life, expected dividends, the risk-free rate, and any other model inputs, including how expected volatility was determined.
- Whether and how expected early exercise was incorporated.
- How non-market performance conditions and non-vesting conditions were incorporated.
- Where fair value was not determined using an option-pricing model, that fact, along with the method used and the reasons why the model was not used.
Effect on Profit or Loss and Financial Position
- Total expense recognized for the period from share-based payment transactions, split between equity-settled and cash-settled.
- For cash-settled liabilities: total carrying amount at period end, and the total intrinsic value of vested liabilities at period end.
Full Worked Example
Northbridge Holdings grants three separate share-based payment arrangements to different employee groups on 1 January 2025, and the following facts apply as at its 31 December 2025 year-end.
| Arrangement | Type | Condition | 2025 Expense |
|---|---|---|---|
| A: Senior management options | Equity-settled | 3-year service condition | $180,000 |
| B: Middle management SARs | Cash-settled | 3-year service condition | $95,000 |
| C: Executive performance rights | Equity-settled | 3-year service + EPS target (non-market) | $62,000 |
Arrangement A follows the plain-vanilla mechanic from Part 2 exactly: grant-date fair value (from a Black-Scholes calculation, as in Part 4) is fixed forever, multiplied by the number of options expected to vest, spread on a straight-line basis over three years, debited to expense and credited to a share option reserve within equity.
Arrangement B follows the cash-settled mechanic from Part 5: fair value is remeasured at 31 December 2025 and will be remeasured again at each future reporting date and at settlement, with the year’s movement recognized in profit or loss and the cumulative amount carried as a liability, not equity.
Arrangement C combines Parts 2, 3 and 6: because the EPS target is a non-market performance condition, it is excluded from the grant-date fair value calculation entirely and instead folded into the “number expected to vest” estimate, which is trued up every period exactly like a service condition — if the EPS target is missed part-way through the vesting period, the cumulative expense is reversed down through the true-up mechanism, not written off as a cancellation, because no one deliberately terminated the award.
Total 2025 Share-Based Payment Expense: $180,000 + $95,000 + $62,000 = $337,000
($242,000 credited to equity for Arrangements A and C; $95,000 recognized as an increase in liabilities for Arrangement B)
Downloadable Excel Templates: The IFRS 2 Valuation Toolkit
To put the concepts from this series into practice, the workbook below provides three ready-to-use valuation templates plus a combined expense-recognition register, all built with live formulas so every output recalculates automatically when you substitute your own assumptions.
| Tab | What It Does |
|---|---|
| Share Valuation | Values a restricted share award — market price adjusted for post-vesting sale restrictions and forgone dividends during the vesting period |
| Option Valuation | Full Black-Scholes-Merton calculation, cross-checked against a 20-step binomial (Cox-Ross-Rubinstein) lattice for convergence |
| Performance Rights | Values a performance-rights award, separately handling the non-market-condition case (probability folded into vesting estimate) and the market-condition case (fair value pre-adjusted, never trued up) |
| Expense Register | Cumulative-expense roll-forward across the vesting period, cross-linked to whichever valuation tab applies, with the true-up mechanic from Part 2 built in as live formulas |
Download the IFRS 2 Valuation Toolkit (Excel)
A 6-sheet workbook (Instructions, Share Valuation, Option Valuation, Performance Rights, Settings, and Expense Register) with fully live formulas — substitute your own share price, exercise price, volatility, expected life, risk-free rate, and vesting assumptions, and every output recalculates automatically. Includes a Black-Scholes valuation cross-checked against a 20-step binomial lattice, and a cumulative expense roll-forward with the service-condition true-up mechanism built in.
Where to Go Next
This closes the seven-part IFRS 2 series: scope and objective (Part 1), the equity-settled measurement and expense-recognition mechanics (Part 2), vesting conditions and the market-versus-non-market split (Part 3), option-pricing models and the live Black-Scholes calculator (Part 4), cash-settled and choice-of-settlement transactions (Part 5), modifications and cancellations (Part 6), and disclosures with a full worked example (this Part). Use the pill navigator above to jump back to any part, or download the valuation toolkit to start applying these concepts to your own share-based payment arrangements.
Need Help With Share-Based Payment Accounting?
From designing an equity incentive plan through valuing options and preparing the disclosures, our team can help you apply IFRS 2 correctly. Contact our Financial Advisory team today.