Ind AS 102: Share-based Payment — Detailed Guide

Standard orientation

What Ind AS 102 is designed to achieve

Require an entity to recognise the goods or services received in share-based payment transactions and the corresponding increase in equity or liability.

Scope: Applies to equity-settled, cash-settled and choice-of-settlement share-based payments, including employee awards and group arrangements. It excludes instruments issued as consideration in a business combination and contracts within specified financial-instrument guidance.

Equity-settled

Measure employee services at grant-date fair value; do not remeasure after grant.

Cash-settled

Recognise a liability remeasured to fair value through P&L until settlement.

Vesting conditions

Service and non-market conditions affect quantity; market and non-vesting conditions affect grant-date fair value.

Group plans

Classification depends on the receiving entity obligation and the nature of instruments granted.

Reading method: Requirements are paraphrased and grouped where they form one integrated rule. Apply the current notified standard for final conclusions.

Full standard map

Paragraph-by-paragraph register

Paragraphs	Requirement and simple decode
1	Objective Requires recognition of share-based payment effects, including employee option expense.
2–6	Scope Covers equity-settled, cash-settled and settlement-choice arrangements; excludes business-combination consideration and specified financial-instrument contracts.
7–9	Recognition principle Recognise goods or services when received, with corresponding equity or liability; expense unless another standard requires asset recognition.
10–13	Equity-settled measurement Measure services by reference to fair value of goods/services when reliable; for employees use equity-instrument fair value at grant date.
13A–13B	Unidentifiable goods or services When identifiable consideration is less than fair value of equity instruments, recognise unidentifiable goods or services for the difference.
14–15	Immediate and service-period vesting Recognise immediately when vested at grant date; otherwise recognise over the vesting period.
16–18	Fair value at grant date Estimate fair value using market prices or valuation techniques consistent with market-participant assumptions.
19–21	Vesting conditions Service and non-market performance conditions affect the number expected to vest; market conditions are incorporated into fair value.
21A	Non-vesting conditions Incorporate non-vesting conditions into fair value and continue recognition when the counterparty satisfies all vesting conditions.
22–23	Post-grant treatment Do not reverse expense for failure of market or non-vesting conditions when other vesting conditions are met; equity is not remeasured after vesting.
24–25	Unreliable fair value in rare cases Use intrinsic value remeasured until settlement when fair value cannot be estimated reliably.
26–29	Modifications Recognise at least the original grant-date fair value if vesting conditions are met and recognise incremental fair value for beneficial modifications.
28–29	Cancellations and settlements Treat cancellation during vesting as accelerated vesting; payments reduce equity up to fair value of repurchased instruments and excess is expense.
30–33	Cash-settled awards Recognise liability at fair value and remeasure each reporting date and settlement date, with changes in P&L.
33A–33D	Cash-settled vesting conditions Apply service/non-market quantity adjustments and incorporate market/non-vesting conditions into liability fair value.
34–40	Counterparty settlement choice Account for a compound instrument containing debt and equity components when the counterparty chooses settlement.
41–43	Entity settlement choice Classify as cash-settled when a present obligation to settle in cash exists; otherwise classify as equity-settled.
43A–43D	Group share-based payments Receiving and settling entities classify based on their own rights and obligations, even when another group entity settles.
44–45	Disclosure objective Enable users to understand nature, extent and valuation of arrangements.
46–48	Arrangement disclosures Describe plans, numbers and weighted-average exercise prices, option movements and modifications.
49–52	Valuation and expense disclosures Disclose valuation models, inputs, total expense, liabilities and intrinsic values.
53–59	Transition and effective-date history Addresses application to awards granted, modified or settled around transition and later amendments.
Appendix A	Definitions Defines grant date, measurement date, vesting conditions, market/non-market conditions, performance targets and share-based payment arrangement.
Appendix B	Application guidance Covers option-pricing models, expected volatility, dividends, early exercise, reload features and group arrangements.

Major areas decoded

Technical requirements in simple language

Grant date

Grant date occurs only when both parties share an understanding of terms and necessary approvals are obtained; service commencement can precede grant date.

Condition classification

Service and non-market performance conditions true up the quantity. Market and non-vesting conditions are priced into fair value and normally do not trigger reversal.

Equity versus liability

The legal label “option” is insufficient. Cash alternatives, past practice and settlement obligations can create a liability.

Modification accounting

A beneficial modification creates incremental fair value in addition to the original expense; an adverse modification does not reduce original cost.

Cancellation

Employee cancellation or entity cancellation accelerates unrecognised expense, subject to treatment of forfeiture for failure to satisfy vesting conditions.

Group awards

The parent and subsidiary can classify the same award differently in their separate financial statements.

Tax withholding net settlement

An equity-classified award can retain equity classification for a statutory tax-withholding net-settlement feature when conditions are met.

Visual learning

Finin2min decision map

Editable SVG and high-resolution PNG versions are included in this batch.

Exceptions and highlights

What professionals frequently overlook

Equity instruments issued to acquire a business are governed by Ind AS 103, although replacement employee awards may fall under Ind AS 102.
Employee equity-settled awards use grant-date fair value, not service-date intrinsic value.
Equity-settled awards are not remeasured after grant date.
Cash-settled liabilities are remeasured every reporting date.
Failure of a market condition does not reverse expense if service conditions are met.
Failure of a service or non-market condition reverses expense for awards that do not vest.
Adverse modifications do not reduce the original grant-date expense.
Group entities can reach different classification conclusions for the same award.

Practical application

Transaction examples

Fact pattern

Treatment

Reason

Employee stock options vesting after three years

Grant-date fair value over service period

Employee service is measured by reference to equity-instrument fair value.

Cash SARs

Liability remeasured each period

Settlement amount varies with share price.

Revenue target not achieved

Reverse non-market-condition expense

The award does not vest due to a non-market performance condition.

Share-price target not achieved after service completed

Do not reverse

The market condition was included in grant-date fair value.

Exercise price reduced during vesting

Recognise incremental fair value

It is a beneficial modification.

Parent grants parent shares to subsidiary employees

Subsidiary often equity-settled if no settlement obligation

Parent records settlement under group-plan rules.

Accounting mechanics

Illustrative journal entries

Entries are simplified and may require tax, fair-value or presentation adjustments.

Equity-settled employee award

Dr Employee compensation expense Cr Share-based payment reserve

Cash-settled award

Dr Employee compensation expense Cr Share-based payment liability

Remeasure cash-settled liability

Dr / Cr Share-based payment expense Cr / Dr Share-based payment liability

Exercise of equity award

Dr Cash Dr Share-based payment reserve Cr Share capital Cr Securities premium

CA / finance / boardroom cases

Applied case studies

1. Grant date after approval

Applied case

Employees begin service on 1 April, board approves terms then, but shareholder approval is required and obtained on 30 June.

Finin2min analysis: Grant date is normally 30 June when approval and shared understanding exist. Recognise service from commencement using an estimate until grant-date fair value is fixed.

2. Market and service conditions

Applied case

Options vest after three years of service if share price reaches ₹500. Employees complete service but target fails.

Finin2min analysis: Recognise the full grant-date fair-value expense because the market condition is priced into valuation and service was completed.

3. Cancellation by employee

Applied case

Employees pay a deposit and can cancel options voluntarily during vesting.

Finin2min analysis: Treat cancellation as accelerated vesting unless it represents failure to satisfy a vesting condition.

4. Group cash obligation

Applied case

Parent grants parent shares but subsidiary is contractually required to pay parent cash equal to settlement value.

Finin2min analysis: The subsidiary may have a cash-settled obligation, while the parent applies group-plan accounting based on its own settlement obligation.

5. Tax withholding

Applied case

Employer withholds shares equal to statutory employee tax and remits cash to authorities.

Finin2min analysis: The award may remain equity-settled if the net-settlement feature is limited to the statutory withholding obligation.

Global comparison

Ind AS versus IFRS and US GAAP

Topic	Ind AS	IFRS	US GAAP
Employee equity awards	Grant-date fair value, no remeasurement.	Broadly aligned with IFRS 2.	ASC 718 is similar but differs in forfeitures, classification and tax accounting.
Cash-settled awards	Fair-value liability remeasured through P&L.	Aligned.	US GAAP liability awards also remeasure, with detailed differences.
Forfeitures	Estimate service/non-market vesting outcomes and true up.	Aligned with IFRS 2.	US GAAP permits a policy election to account for forfeitures as they occur.
Group awards	Entity-specific classification under group guidance.	Aligned.	US group-plan accounting differs.
Modification	Incremental fair value for beneficial changes; no reduction for adverse changes.	Aligned.	US modification framework has different exceptions and triggers.

Implementation lens

Implications for key stakeholders

HR/Compensation

Maintain award terms, service status and modifications.

Valuation

Support option model, volatility, life, dividends and market conditions.

Tax

Track tax deductions, withholding and deferred tax.

Consolidation

Reconcile parent and subsidiary group-plan entries.

Audit committee

Challenge classification, grant date and modifications.

Quality-control watchlist

Common errors and exam traps

Using intrinsic value instead of fair value for employee equity awards.
Using board approval date when shareholder approval is substantive.
Remeasuring equity-settled awards after grant date.
Failing to remeasure cash-settled liabilities.
Reversing expense for failure of a market condition.
Not reversing for failure of a service condition.
Ignoring incremental fair value on beneficial modification.
Reducing expense for an adverse modification.
Treating cancellation as ordinary forfeiture.
Using one classification for all group entities.
Ignoring statutory tax-withholding settlement rules.
Omitting valuation assumptions and movement disclosures.

Finin2min Q&A

Frequently asked questions

1. When is grant date?

When the entity and counterparty share an understanding of terms and all necessary approvals are obtained.

2. Are equity awards remeasured?

No, not after grant date for employee equity-settled awards.

3. Are cash awards remeasured?

Yes, until settlement.

4. What happens when a market target fails?

Expense is not reversed if other vesting conditions are met.

5. How are beneficial modifications treated?

Recognise incremental fair value in addition to original grant-date cost.

6. Can parent and subsidiary classify differently?

Yes, based on each entity’s rights and obligations.

Two-minute revision

Finin2min cheat sheet

IDENTIFY SETTLEMENT → EQUITY: GRANT-DATE FV / CASH: REPORTING-DATE FV → CLASSIFY CONDITIONS → TRUE UP QUANTITY → ACCOUNT MODIFICATIONS

Validation register

Primary and authoritative sources

ICAI Compendium 2025–26 — Volume IPrimary or authoritative validation source.
Open source ↗

IFRS Foundation — IFRS 2Primary or authoritative validation source.
Open source ↗

ICAI Ind AS 102 learning modulePrimary or authoritative validation source.
Open source ↗

Review date: 26 June 2026. Recheck later MCA notifications and ICAI compendiums before applying to a later reporting period.