IFRS 2 Share-Based Payments: How to Account for Non-Vested Share Option Expenses?

IFRS 2 share-based payments expense recognition vesting period earnings per share compensation expense

Question 2 Tucan granted their top executives share options on 1 January 2016. During 2018, the remaining two top executives both stay with Tucan, but its earnings per share declines back to the 2015 level. As a result, the share options do not become exercisable. See a table below detailing the expense history. What is the expense that will be shown in the accounts for 2018? Question 2 Tucan granted their top executives share options on 1 January 2016. During 2018, the remaining two top executives both stay with Tucan, but its earnings per share declines back to the 2015 level. As a result, the share options do not become exercisable. See a table below detailing the expense history. What is the expense that will be shown in the accounts for 2018? (500,000) for expense in 2018 and 5,000 for cumulative expense (1,250,000) for expense in 2018 and 1,300,000 for cumulative expense (1,166,667) for expense in 2018 and 0 for cumulative expense (500,000) for expense in 2018 and 5,000 for cumulative expense (1,250,000) for expense in 2018 and 1,300,000 for cumulative expense (1,166,667) for expense in 2018 and 0 for cumulative expense

Under IFRS 2, Share-based Payments, when there is a modification or cancellation of a share-based payment, an entity should recognize a compensation expense over the vesting period, reflecting the fair value of the grant at each reporting date. If the share options granted by Tucan to its executives in 2016 did not become exercisable in 2018 due to the decline in earnings per share, the expense recognized in 2018 would reflect the portion of the total grant that has vested during that year. Since the options have not become exercisable, the full expense related to those options would be recognized in the year they vest or expire, which in this case seems to be 2018.

Given the information provided in the question, it's not clear what the actual expense was in previous years. However, if no expense was recognized in prior years because of the vesting conditions not being met until 2018, the full expense of the share-based payment would be recognized in 2018. Therefore, assuming the options were granted in 2016 and the vesting conditions were not met until 2018, the entire expense would be recognized in the accounts for 2018. The correct answer, based on the information given, would be the expense for 2018, which is (1,250,000) and a cumulative expense of 1,300,000.

So, the expense that will be shown in the accounts for 2018 is (1,250,000) and the cumulative expense would be 1,300,000.

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