Share-based payments and settlement alternatives

Entity A grants an award to its employees under terms which permit it to choose whether to settle the award in cash or in shares. Entity A has classified the award as equity-settled as it considers that it had not created a present obligation to settle in cash either by past practice or stated policy of settling in cash and it is not prohibited from issuing shares. The grant date fair value (FV) of the award is £1600. At the date of settlement the FV of the equity alternative is £2000. The entity is considering settling the award in cash and making a payment of £2400.