Cancellation and settlement – best estimate of cancellation expense On 1 January 2012, an entity (A) granted 150 employees an award of free shares, with a grant date fair value of £5, conditional upon continuous service and performance targets over the 3-year period ending 31 December 2014. The number of shares awarded varies according to the extent to which targets (all non-market vesting conditions) have […]

Is there an accounting arbitrage between modification and cancellation of an award? At the beginning of year 1, an entity grants 100 share options to each of its 500 employees. Each grant is conditional upon the employee remaining in service over the next three years. The entity estimates that the fair value of each option is €15. By the end of year 1, the entity’s […]

Replacement award on termination of employment On 1 January 2012, an executive is granted the right to 10,000 free shares on condition of remaining in service until 31 December 2014. The fair value of the award at grant date is £2.00 per share. On 31 December 2013, the executive’s employment is terminated and he therefore loses his right to any shares. However, as ex gratia […]

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 […]

Two option awards running in parallel On 1 January 2012, an entity granted 1,000 options (the ‘A options’) to an employee, subject to non-market vesting conditions. The grant date fair value of an A option was €50. As at 1 January 2013, the share price is significantly below the exercise price of an A option, which had a fair value at that date of €5. […]

Award of shares to a fixed monetary value On 1 January 2013, the reporting entity grants: to Employee A an award of 1,000 shares subject to remaining in employment until 31 December 2015; and to Employee B €10,000 subject to remaining in employment until 31 December 2015, to be paid in as many shares as are (on 31 December 2015) worth €10,000. Both awards vest, […]

Award with market condition and fixed vesting period At the beginning of year 1, an entity grants to 100 employees 1,000 share options each, conditional upon the employees remaining in the entity’s employment until the end of year 3. However, the share options cannot be exercised unless the share price has increased from €50 at the beginning of year 1 to more than €65 at […]

Equity-settled award satisfied with market purchase of treasury shares An entity awards an employee a free share with a fair value at grant date of £5 which has a fair value of £8 at vesting. At vesting the entity purchases a share in the market for £8 for delivery to the employee. If the scheme were treated as cash-settled, there would be a charge to […]

Award with market condition and variable vesting period At the beginning of year 1, an entity grants 10,000 share options with a ten year life to each of ten senior executives. The share options will vest and become exercisable immediately if and when the entity’s share price increases from £50 to £70, provided that the executive remains in service until the share price target is […]

Modification of equity-settled award to cash-settled award A Modified award with same fair value as original award On 1 January 2013 an entity granted an equity-settled award, with a fair value at that date of €500, and vesting if the employee is still in service on 31 December 2016. On 1 January 2015, the award is modified so as to become cash-settled, but its terms […]