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)
Date: 2008-12-16
Institutions: European Commission
Subjects: accounting, capital market, international standard

17.12.2008

EN

Official Journal of the European Union

L 338/17

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
Community,

establishing the European

the
Having regard to Regulation (EC) No 1606/2002 of
European Parliament and of the Council of 19 July 2002 on
the application of international accounting standards (1), and in
particular Article 3(1) thereof,

Whereas:

(1)

(2)

(3)

By Commission Regulation (EC) No 1126/2008 (2)
certain international accounting standards and interpre­
tations that were extant at 15 October 2008 were
adopted.

On 17 January 2008,
the International Accounting
Standards Board (IASB) published Amendments to Inter­
national 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.

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

Financial

Reporting Advisory Group’s
European
(EFRAG’s) opinions (3),
the Standards Advice Review
Group considered EFRAG’s opinion on endorsement
and advised the European Commission that it is well
balanced and objective.

Regulation (EC) No 1126/2008 should therefore be
amended accordingly.

The measures provided for in this Regulation are in
accordance with the opinion of the Accounting Regu­
latory Committee,

(4)

(5)

HAS ADOPTED THIS REGULATION:

Article 1

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, here­
inafter ‘amendment to IFRS 2’, as set out in the Annex to this
Regulation.

Article 2

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
financial year starting after
31 December 2008.

its first

Article 3

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

Charlie McCREEVY
Member of the Commission

(1) OJ L 243, 11.9.2002, p. 1.
(2) OJ L 320, 29.11.2008, p. 1.

(3) OJ L 199, 21.7.2006, p. 33.

L 338/18

EN

Official Journal of the European Union

17.12.2008

ANNEX

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

17.12.2008

EN

Official Journal of the European Union

L 338/19

AMENDMENTS TO IFRS 2

Share-based Payment

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.

NON-VESTING CONDITIONS

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.’

CANCELLATIONS

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.’

EFFECTIVE DATE

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.’

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Official Journal of the European Union

17.12.2008

DEFINITIONS
In Appendix A, the definitions of ‘vest’ and ‘vesting conditions’ are amended as follows.

‘vest

vesting conditions

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.

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.’