BC265 For share‑based payment transactions in which the terms of the arrangement provide the entity with a choice of whether to settle in cash or by issuing equity instruments, the entity would need first to determine whether it has an obligation to settle in cash and therefore does not, in effect, have a choice of settlement. Although the contract might specify that the entity can choose whether to settle in cash or by issuing equity instruments, the Board concluded that the entity will have an obligation to settle in cash if the choice of settlement in equity has no commercial substance (eg because the entity is legally prohibited from issuing shares), or if the entity has a past practice or a stated policy of settling in cash, or generally settles in cash whenever the counterparty asks for cash settlement. The entity will also have an obligation to settle in cash if the shares issued (including shares issued upon the exercise of share options) are redeemable, either mandatorily (eg upon cessation of employment) or at the counterparty’s option.