Cash-settled share-based payments

In this lesson

1. 0:00 Cash settled share based payments overview
2. 1:01 Share appreciation rights and valuation methods
3. 2:17 Replacing cash schemes with equity schemes
4. 2:52 Ward Company SARS worked example setup
5. 4:10 Calculating SARS liability year by year
6. 6:41 Exercise period and final settlement process

About this lesson

Cash-settled schemes are measured at fair value on each reporting date, with changes recognised in profit or loss—unlike equity-settled schemes where fair value is fixed at grant date. You'll explore share appreciation rights (SARs) and redeemable shares, understand how to calculate intrinsic and time value, and work through a detailed multi-year example showing how to recognise expenses and liabilities as employees exercise their rights. The core difference with cash-settled payments is that they create a liability on your balance sheet because cash will eventually be paid out. This means fair value must be remeasured at every reporting date to reflect changes in share price, with any movement hitting the profit or loss account. The lesson walks you through a practical scenario involving 600 employees granted SARs over a three-year vesting period, demonstrating how to account for employee departures, changing fair values, and staggered exercise periods—giving you the methodology to handle real-world complexity in your exams and practice.

Duration: 9m