Abstract 41 has the effect of implementing the International Accounting Standards Board’s (IASB’s) International Financial Reporting Interpretations Committee (IFRIC) Interpretation 8 ‘Scope of IFRS 2’ in the UK and the Republic of Ireland for entities preparing their financial statements in accordance with UK accounting standards and, in doing so, are applying FRS 20 (IFRS 2) ‘Share-based Payment’. 

FRS 20 ‘Share-based Payment’ requires an entity to recognise share-based payment transactions in its financial statements. Transactions in which an entity receives goods or services as consideration for equity instruments of the entity (including shares or share options) are share-based payment transactions. Such transactions give rise to expenses (or, if applicable, assets) that should be measured at fair value.

IFRIC 8 was developed to address situations in those parts of the world where, for public policy or other reasons, companies give their shares or rights to shares to individuals, organisations or groups that have not provided goods or services to the company. An example is the issue of shares to a charitable organisation for less than fair value, where the benefits are more intangible than usual goods or services. Abstract 41 confirms that such arrangements fall within the scope of FRS 20 (IFRS 2).