Share Based Payments Flashcards
What are the two types of share based payments
Equity and cash based settlements
How do you assign a value to a share option under the equity-settled method
At grant date, the fair value remains static and not updated; expense each year based on actual and forecast (of leavers) for remaining years
Why would we not adjust the option to fair value
If we were to adjust, it would seem we were paying more for staff expenses based on the share price movement which isn’t reasonable
How do you assign a value to a share option under the equity-settled method
At grant date and then subsequently updated to fair value at the end of each year
How to treat share based payments if the decision on whether shares of cash is based on the decision of the employee
Through split-accounting
What are market and non-market conditions?
Market conditions are elements such as share price.
Non-market based are more controllable such as in the role for X years and increasing sales or reducing expenses by X%
What happens if a share scheme is cancelled
Expense is recognised immediately (acceleration)
What happens is a share option is not exercised
The equity reserve is transferred to Retained Earnings
How are share appreciation rights treated?
As cash settled, the liability and relevant expense is the value is based on the fair value updated each year
How to deal with combination of market and non-market conditions
Recognise the cost even if market condition not met
How to record a change in options value
Treat the change in value as a sperate option, effectively vesting period reduced
What are the three steps required for a share based payment cancellation?
1) Expense remainder of FV of the instrument
2) Compensation element, treat like equity buy back
3) If compensation more than FV, recognise immediately in IS
