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4.14 Tax withholding arrangements—impact to classification
Publication date: 30 Nov 2022
us IFRS & US GAAP guide
There could be a difference in award classification if the limit for tax withholding is exceeded.
US GAAP | IFRS |
An award containing a net settled tax withholding clause could be equity-classified as long as the arrangement limits tax withholding to the maximum individual statutory tax rate in a given jurisdiction. If tax withholding is permitted at some higher rate, then the entire award (not solely the excess) would be classified as a liability. | IFRS has an exception similar to US GAAP. However, there will still be a difference if the withholding limit is exceeded, as only the excess number of equity instruments that can be withheld would be separated and accounted for as a cash-settled share-based payment under IFRS. |
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