Acc541

Memo:

To: All Executives,

From: Jack Major, Audit Officer, Public Accountants Inc

Date: February 4, 2xxx

Subject: Share-based payment reporting and Special purpose entities reporting

Share based payment means that your company makes payment through an issue of shares. Such payment is made in two cases. First when the payment is made for goods and services received and second shares are given to employees as an incentive. In case the shares are given for goods and service provided, the fair value of the goods and services provided are accounted for as an asset or as an expense. On the other hand if the shares are given as incentives to employees, it becomes necessary to assess the market value of the shares when they are given to them and then to charge the cost over the period during which the benefit vests. Your firm should measure share-based compensation of employee indirectly at fair value of the equity instruments (See IFRS2.11).    

When goods or services are received for payment made through shares, these services are recognized as assets, if the goods purchased qualify for recognition as assets or are expensed when your company obtains the goods or when the services are received. (See IFRS2.7 and 2.8). In general services are assumed to be provided and so are expensed over the vesting period. (See IFRS 2.15).  During my auditing work I shall pay special attention to the share based payment reporting and assess if the share-based payment reporting has been done in accordance to the IFRS guidelines.  

In case of goods and services the goods and services share-based payment reporting should be focused on goods and services settled in your company's shares. The goods received by your company may include intangible asses, plant and machinery, property, consumables, inventories and non-financial assets (See IFRS 2.5). Even if your company issues share options for goods received or services performed and the share options are issued based on...