IFRS 2 “Share-based Payment” regulates the recognition of share-based payments under International Financial Reporting Standards (IFRS), i.e. of transactions in which a reporting company grants equity instruments or enters into payment obligations whose amount is based on the price or the value of shares in the company. The standard focuses on stock option plans and similar employee and manager entitlements as remuneration.
In accordance with IFRS 2, stock options and similar rights must always be reported at fair value in the balance sheet, with said fair value being allocated as staff expenses over the vesting period. The fair value of options is to be specified using a recognized mathematical valuation model for finances. Accounting regulations distinguish between equity-settlement and cash-settlement. Fair value on the grant date is decisive for options recognized in accordance with the equity-settlement method. Fair value needs to be re-determined on each reporting date for options recognized in accordance with the cash-settlement method.