Under IFRS 2, with respect to choice-of-settlement share-based payments, if it is the entity that has the right to choose between equity settlement and cash settlement, when must the entity choose the cash settlement?
A) If the supplier provides services
B) If the supplier provides goods
C) If the entity has a present obligation to settle in cash
D) The entity always has the option to choose either method.

Question

Quizplus · Accepted Answer

The entity must choose the cash settlement option under IFRS 2 only if it has a present obligation to settle in cash. This means that if the entity has a contractual obligation to pay the supplier in cash, or if it is customary in the industry to settle such transactions in cash, then the entity must choose the cash settlement option for share-based payments. Otherwise, the entity is free to choose either equity or cash settlement.

Under IFRS 2, with Respect to Choice-Of-Settlement Share-Based Payments, If