Understanding Share Option Expenses: Accounting for Unexercised Stock Options

Question 5 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? (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

The expense related to the share options granted to Tucan's top executives in 2016 would be recognized over the vesting period of the share options, which typically spans over several years. If the share options did not become exercisable in 2018 due to the decline in earnings per share, the expense related to those options would continue to be amortized over the remaining vesting period.

Given that the table details an expense of (1,166,667) for 2018 and 0 for cumulative expense, it seems that the full expense related to the unexercised options would be recognized in 2018 since no cumulative expense has been recorded in previous years. Therefore, the expense that will be shown in the accounts for 2018 would be (1,166,667).

So, the correct answer is:

(1,166,667) for expense in 2018 and 0 for cumulative expense.

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