Dr Cash
Scenario 1 Cr Share capital
Cr Share premium
Why not IFRS 2?
Because no services or
goods are received in
return — only cash
from investors.
A company issues 10,000 ordinary
shares at $5 each to public
investors. The company receives
$50,000 in cash.
Dr Intangible Asset
Scenario 2 Cr Share capital
Cr Share premium
Why IFRS 2?
Co. is receiving an
asset in exchange for
equity shares.
On 1 Jan 20X1, Alpha Ltd acquires a
software license from a tech
company. Instead of paying cash,
Alpha Ltd agrees to issue 5,000 of
its own equity shares in exchange
for the license.
Dr Investment in Equity
Scenario 3 Cr Cash
Why not IFRS 2?
No services or goods are
involved; it's a financial
asset acquisition
Our company purchases 2,000
equity shares of a listed company
for cash.
Dr Expense
Scenario 4 Cr Equity Option (OCE)
Why IFRS 2?
Issuing shares for services
received from employee
A company grants 1,000 share options
to its finance manager as part of his
remuneration package. The options will
vest after 3 years of service.
Dr Cash
Scenario 5 Cr Financial liability
Cr Equity Option (OCE)
Why not IFRS 2?
There is no service or goods
received – this is purely a
financing arrangement.
A company issues a convertible loan note
of $100,000 to an investor. The note pays
interest annually and is convertible into
1,000 shares after 5 years.
Dr Expense
Scenario 6 Cr Share capital
Cr Share premium
Why IFRS 2?
Non-employee services
settled in shares
A consultant helps a startup with strategic
planning, and instead of cash, is issued
500 options that vest immediately.
Dr Expense
Scenario 7 Cr Share capital
Cr Share premium
Why IFRS 2?
Non-employee services
settled in shares
A software company agrees to pay its IT
vendor in equity shares worth $20,000 for
providing software development services.