ward with no re-estimation of number of awards vesting
An entity grants 100 share options to each of its 500 employees. Vesting is conditional upon the employees working for the entity over the next three years. The entity estimates that the fair value of each share option is €15. The entity estimates that 20% of the original 500 employees will leave during the three year period and therefore forfeit their rights to the share options.
If everything turns out exactly as expected, the entity will recognise the following amounts during the vesting period for services received as consideration for the share options.
|
Year Calculation of cumulative expense |
Cumulative |
Expense for period (C) |
|
expense (C) |
||
|
1 50,000 options x 85% x €15 x 1/3 |
212,500 |
212,500 |
|
2 50,000 options x 88% x C15 x 2/3 |
440,000 |
227,500 |
Example 32.8: Award with re-estimation of number of awards vesting due to staff turnover
As in Example 32.7 above, an entity grants 100 share options to each of its 500 employees. Vesting is conditional upon the employee working for the entity over the next three years. The entity estimates that the fair value of each share option is 15.
In this case, however, 20 employees leave during the first year, and the entity’s best estimate at the end of year 1 is that 15% of the original 500 employees will have left before the end of the vesting period. During the second year, a further 22 employees leave, and the entity revises its estimate of total employee departures over the vesting period from 15% to 12% of the original 500 employees. During the third year, a further 15 employees leave. Hence, a total of 57 employees (20 + 22 + 15) forfeit their rights to the share options during the three year period, and a total of 44,300 share options (443 employees × 100 options per employee) finally vest.
The entity will recognise the following amounts during the vesting period for services received as consideration for the share options.
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