Increase in number of equity instruments or modification of vesting conditions? An entity grants a performance-related award which provides for different numbers of options to vest after 3 years, depending on different performance targets as follows. Profit growth Number of options 5% – 10% 100 over 10% – 15% 200 over 15% 300 During the vesting period, the entity concludes that the criteria are too […]

Award modified by changing non-market performance conditions At the beginning of year 1, the entity grants 1,000 share options to each member of its sales team, conditional upon the employee remaining in the entity’s employment for three years, and the team selling more than 50,000 units of a particular product over the three year period. The fair value of the share options is £15 per […]

Award modified by reducing the exercise price and extending the vesting period At the beginning of year 1, an entity grants 100 share options to each of its 500 employees, with vesting 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 share […]

Cancellation and settlement – basic accounting treatment At the start of year 1 an entity grants an executive 30,000 options on condition that she remain in employment for three years. Each option is determined to have a fair value of $10. At the end of year 1, the executive is still in employment and the entity charges an IFRS 2 expense of $100,000 (30,000 × […]

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. […]

Intragroup transfer of goodwill A parent company P has two subsidiaries – A, which was acquired some years ago and B, which was acquired during the period ended 31 December 2010 at a cost of €10 million. For the purposes of this discussion, it is assumed that B had negligible identifiable assets and liabilities. Accordingly, P recorded goodwill of €10 million in its consolidated financial […]