assess whether these employee benefits are termination benefits or post employment b 613351

Estimation of number of awards expected to vest – treatment of anticipated future events

On 1 January 2013, an entity granted an award of 1,000 shares to each of its 600 employees at a particular manufacturing unit. The award vests on completion of three years’ service at 31 December 2015. As at 31 December 2013, the entity firmly intends to close the unit, and terminate the employment of employees, as part of a rationalisation programme. This closure would occur on or around 1 July 2014. The entity has not, however, announced its intentions or taken any other steps so as to allow provision for the closure under IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (see Chapter 29 at 6.1).

Under the original terms of the award, the award would lapse on termination of employment. However, the entity intends to compensate employees made redundant by changing the terms of their award so as to allow full vesting on termination of employment.

What is the ‘best estimate’, as at 31 December 2013, of the number of awards expected to vest? Specifically should the entity:

(a) ignore the intended closure altogether, on the grounds that there is no other recognition of it in the financial statements;

(b) take account of the impact of the intended closure on vesting of the current award, but ignore the intended modification to the terms of the award to allow vesting; or

(c) take account of both the intended closure and the intended modification of the award?