Does a modification increase or decrease the value of an award? On 1 January 2012 an entity granted two executives, A and B, a number of options worth $100 each. On 1 January 2013, A’s options are modified such that they have a fair value of $85, their current fair value being $80. This is treated as an increase in fair value of $5 (even […]

Award with employee cash-settlement alternative introduced after grant At the beginning of year 1, the entity grants 10,000 shares with a fair value of $33 per share to a senior executive, conditional upon the completion of three years’ service. By the end of year 2, the fair value of the award has dropped to $25 per share. At that date, the entity adds a cash […]

Award modified by repricing 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 share price has dropped, and the entity reprices […]

Modification of non-market performance condition in employee’s favour At the beginning of year 1, the entity grants 1,000 share options to each member of its sales team, with exercise 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 […]

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 […]

Awards with multiple service periods Scenario 1 On 1 January 2013, the entity enters into a share-based payment arrangement with an employee. The employee is informed that the maximum potential award is 40,000 shares, 10,000 of which will vest on 31 December 2013, and 10,000 more on each of 31 December 2014, 31 December 2015 and 31 December 2016. Vesting of each tranche of 10,000 […]

Award with non-vesting condition only An entity grants a director share options on condition that the director does not compete with the reporting entity for a period of at least three years. The ‘non-compete’ clause is considered to be a non-vesting condition (see above and below). As this is the only condition to which the award is subject, the award has no vesting conditions and […]

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 […]