BC334 The Board decided to clarify the definition of ‘vesting conditions’ in IFRS 2 to ensure the consistent classification of conditions attached to a share-based payment. Previously, this Standard did not separately define ‘performance condition’ or ‘service condition’, but instead described both concepts within the definition of vesting conditions.

BC335 The Board decided to separate the definitions of performance condition and service condition from the definition of vesting condition to make the description of each condition clearer.

BC336 In response to the comments received on the Exposure Draft Annual Improvements to IFRSs 2010-2012 Cycle (Proposed amendments to International Financial Reporting Standards) (the ‘ED’), published in May 2012, the Board addressed the following concerns that had been raised about the definitions of performance condition, service condition and market condition:

(a) whether a performance target can be set by reference to the price (or value) of another entity (or entities) that is (are) within the group;

(b) whether a performance target that refers to a longer period than the required service period may constitute a performance condition;

(c) whether the specified period of service that the counterparty is required to complete can be either implicit or explicit;

(d) whether a performance target needs to be influenced by an employee;