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**Step 1: Recognition of Share-Based Payments**

In accounting for share-based payments under IFRS 2, the first step is the recognition of these payments in the financial statements. Share-based payments can take various forms, such as stock options, restricted shares, or performance shares. The standard requires entities to recognize the fair value of these payments as an expense in the income statement, with a corresponding increase in equity.

- **Fair Value Measurement:** The fair value of share-based payments is determined at the grant date and is typically calculated using valuation models like the Black-Scholes model for options.

**Step 2: Measurement and Vesting Period Considerations**

- **Measurement Period:** IFRS 2 requires entities to measure the fair value of the share-based payments over the vesting period. This reflects the period during which employees are required to meet certain conditions, such as continued employment, to be entitled to the shares.

- **Vesting Period:** The vesting period is crucial, and the entity needs to assess the probability of meeting vesting conditions. If it is probable that the conditions will be met, the fair value of the share-based payment is recognized over the vesting period; otherwise, no expense is recognized.

**Step 3: Presentation and Disclosure in Financial Statements**

- **Income Statement Presentation:** The share-based payment expense is recognized in the income statement, and the corresponding credit is made to equity. The expense is typically recognized on a straight-line basis over the vesting period.

- **Disclosures:** IFRS 2 requires entities to provide comprehensive disclosures in the financial statements. This includes information about the fair value of the share-based payments, the assumptions made in determining fair value, and details about the vesting conditions.

**Objective Type Question:** How is the fair value of share-based payments typically determined under IFRS 2?

A) Using historical cost

B) Based on market value at the end of the vesting period

C) Calculated at the grant date using valuation models

D) A fixed percentage of the company's net income

Choose the correct option and provide a brief explanation of your choice.

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