ACCA Strategic Business Reporting (SBR) Practice Exam

Under IFRS 2, the expense related to share-based payment transactions is measured at the fair value of the goods or services received. This principle ensures that the expense reflects the current market conditions and the economic reality of the transaction at the time the goods or services are received.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Thus, measuring the expense at fair value allows for a more accurate representation of the cost to the entity, particularly in transactions where the goods or services received are not easily obtainable in the market.

This approach is especially significant in share-based payments, where the price can fluctuate and is often not straightforward, making fair value a more reliable measure compared to mere cost incurred or market value considerations. By focusing on fair value, IFRS 2 aims to enhance the transparency and comparability of financial statements for users.