Rules on the Measurement and Recognition of Share based Payments

Why do IASB formulate rules on the measurement and recognition of share-based payments?

Prior to the introduction of IFRS 2 Share based payments, there was no requirement to recognize the cost of compensation payments to employees and transactions for the acquisition of goods and services from others in the financial statement.

This situation can be criticized as reducing the transparency and reliability of financial statements. Standard setters have argued that recognizing the cost of share based payments in the financial statements of entities improves the relevance, reliability and comparability of that financial information and helps users of financial information to understand better the economic transactions affecting an enterprise and supports resource allocation decisions.