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ESPPs generally will be deemed compensatory more often under IFRS than under US GAAP.
US GAAP
IFRS
ESPPs are compensatory if terms of the plan:
  • Either (1) are more favorable than those available to all shareholders, or (2) include a discount from the market price that exceeds the percentage of stock issuance costs avoided (discount of 5 percent or less is a safe harbor);
  • Do not allow all eligible employees to participate on an equitable basis; or
  • Include any option features (e.g., look-backs).
ESPPs are always compensatory and treated like any other equity-settled share-based payment arrangement. IFRS does not allow any safe-harbor discount for ESPPs.
In practice, most ESPPs are compensatory; however, plans that do not meet any of the above criteria are non-compensatory.

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