How does IFRS 2 classify share-based payment transactions?

IFRS 2 classifies transactions into three categories, determining their credit entry:

1. Equity-settled: The entity receives goods or services as consideration for equity instruments. (Credit: Equity). Measured at the fair value of equity instruments granted at grant date.
2. Cash-settled: The entity acquires goods or services by incurring a liability based on the price of the shares. (Credit: Liability). Remeasured at fair value at each reporting date.
3. Choice of settlement: Transactions where either party can choose whether the entity settles in cash or by issuing shares.