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Share-based payment transactions are of 3 types ? equity-settled, cash-settled, and optionally-settled. A transaction is equity-settled where the entity receives goods/services that are settled by issuing equity instruments (that is, shares or share options).

The main difference is that fair value recognised as a credit to equity is set at grant date and not changed, whereas the cash-settled share-based payment liability (credit entry) is continually updated to fair value at each reporting date until the liability is settled.

Examples of some of the arrangements that would be accounted for under IFRS 2 include call options, share appreciation rights, share ownership schemes, and payments for services made to external consultants based on the company's equity capital.

The two common types of share-based compensation are stock options and restricted stock. Stock options give holders the right to exchange options for shares at predetermined strike prices before specified expiration dates.

based payment transaction in which the entity acquires goods or services by incurring liability to transfer cash or other assets to the supplier of those goods or services for amounts that are based on the price (or value) of equity instruments (including shares or share options) of the entity or another group ...

FRS 102 Section 26 Share-based Payment sets out the requirements that apply to equity-settled and cash-settled share-based payment transactions. Examples of share-based payment arrangements include share options or share appreciation rights granted to suppliers or employees of an entity in return for goods or services.

As an example, share appreciation rights entitle employees to cash payments equal to the increase in the share price of a given number of the company's shares over a given period. This creates a liability, and the recognised cost is based on the fair value of the instrument at the reporting date.