Document ID: chunk:federal_register_of_legislation:F2022C00493:reg:4:p1
Version: federal_register_of_legislation:F2022C00493
Segment Type: reg
Provision Reference: reg 4 (pt 1/2)
Character Range: 286919–291116

4                                                                                                                                                                                                                                                                                                                                                                                                                                                                              100 employees x 100 share options × CU13.20 × 4/4 –CU99,000                                                                                                                                                                                                  33,000   132,000     33,000   –
                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Total                                                                                                                                                                                                                                                                             132,000  –

Share-based payment arrangements with cash alternatives
IG20 Some employee share-based payment arrangements permit the employee to choose whether to receive cash or equity instruments. In this situation, a compound financial instrument has been granted, ie a financial instrument with debt and equity components. Paragraph 37 of the Standard requires the entity to estimate the fair value of the compound financial instrument at grant date, by first measuring the fair value of the debt component, and then measuring the fair value of the equity component—taking into account that the employee must forfeit the right to receive cash to receive the equity instrument.
IG21 Typically, share-based payment arrangements with cash alternatives are structured so that the fair value of one settlement alternative is the same as the other. For example, the employee might have the choice of receiving share options or cash share appreciation rights. In such cases, the fair value of the equity component will be zero, and hence the fair value of the compound financial instrument will be the same as the fair value of the debt component. However, if the fair values of the settlement alternatives differ, usually the fair value of the equity component will be greater than zero, in which case the fair value of the compound financial instrument will be greater than the fair value of the debt component.
IG22 Paragraph 38 of the Standard requires the entity to account separately for the services received in respect of each component of the compound financial instrument. For the debt component, the entity recognises the services received, and a liability to pay for those services, as the counterparty renders service, in accordance with the requirements applying to cash-settled share-based payment transactions. For the equity component (if any), the entity recognises the services received, and an increase in equity, as the counterparty renders service, in accordance with the requirements applying to equity-settled share-based payment transactions. Example 13 illustrates these requirements.

IG Example 13
Background
An entity grants to an employee the right to choose either 1,000 phantom shares, ie a right to a cash payment equal to the value of 1,000 shares, or 1,200 shares. The grant is conditional upon the completion of three years' service. If the employee chooses the share alternative, the shares must be held for three years after vesting date.
At grant date, the entity's share price is CU50 per share. At the end of years 1, 2 and 3, the share price is CU52, CU55 and CU60 respectively. The entity does not expect to pay dividends in the next three years. After taking into account