Meaning of ‘vesting period’ – award with vesting conditions only An employee is awarded options that can be exercised, if the employee remains in service for at least three years from the date of the award, at any time between three and ten years from the date of the award. For this award, the vesting period is three years; the exercise period is seven years; […]

Determination of grant date Scenario 1 On 1 January 2013 an entity advises employees of the terms of a share award designed to reward performance over the three years ended 31 December 2015. The award is subject to board approval, which is given on 1 March 2013. Grant date is 1 March 2013. However, the cost of the award would be recognised over the three […]

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 […]

Different tax rates applicable to retained and distributed profits An entity operates in a jurisdiction where income taxes are payable at a higher rate on undistributed profits (50%) with an amount being refundable when profits are distributed. The tax rate on distributed profits is 35%. At the balance sheet date, 31 December 2013, the entity does not recognise a liability for dividends proposed or declared […]

Award vesting in instalments (‘graded’ vesting) An entity is considering the implementation of a scheme that awards 600 free shares to each of its employees, with no conditions other than continuous service. Two alternatives are being considered: All 600 shares vest in full only at the end of three years. 100 shares vest after one year, 200 shares after two years and 300 shares after […]

Non-deductible PP& An entity paying tax at 35% acquires a building for €1 million. Any accounting depreciation of the building is not deductible for tax purposes, and no deduction will be available for tax purposes when the asset is sold or scrapped. Recovery of the building, whether in use or on sale, has tax consequences since the building is recovered through future taxable profits of […]

Inception of loan with tax-deductible issue costs A borrowing entity paying tax at 30% records a loan at £9.5 million, being the proceeds received of £10 million (which equal the amount due at maturity), less transaction costs of £500,000, which are deducted for tax purposes in the period when the loan is first recognised. For financial reporting purposes, IAS 39 requires the costs, together with […]

Inception of loan with non-deductible issue costs A borrowing entity paying tax at 30% records a loan at £9.5 million, being the proceeds received of £10 million (which equal the amount due at maturity), less transaction costs of £500,000, which not deductible for tax purposes either in the period when the loan is first recognised or subsequently. For financial reporting purposes, IAS 39 requires the […]