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ACCA Strategic Professional · Strategic Business Reporting (International) · Share-based payment

Dalton Group's subsidiary, Eskdale, has employees with options over the shares of Dalton, the parent, which settles the scheme by issuing its own shares. Dalton changes the scheme during the vesting period by adding a performance condition that is non-market, making vesting harder. Which statement is correct under IFRS 2 for the modification?

A modification that makes vesting harder is not beneficial, so the grant-date fair value remains the measure. The new non-market condition is reflected only in the estimate of how many options will vest. No remeasurement or cancellation treatment applies, whether in the group or the subsidiary's own statements.

  1. AEskdale ignores the new condition because it is only a non-market vesting condition
  2. BDalton must treat the change as a cancellation and recognise the unrecognised expense immediately
  3. CDalton and Eskdale must remeasure the options at the modification-date fair value and replace the original expense
  4. DIf the change is not beneficial to the employees, the services are still measured at the original grant-date fair value, and the new condition affects only the estimate of options expected to vestCorrect

Explanation

Modifications that are not beneficial, such as adding a non-market vesting condition, do not alter the grant-date fair value measurement. The entity recognises services received as if the modification had not occurred, but the new condition is taken into account when estimating the number of instruments expected to vest. The same applies in the subsidiary's separate financial statements, since it receives services but the parent settles. Remeasuring at the modification date is wrong because it applies only to the incremental fair value of beneficial changes.

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