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IFRS 2Workpapers (Step 4 of 5)

Workpaper assignment

Step 4 of 5
Mission · workpaperWorkpaper · IFRS 2L3 · Advanced

Documents

Company profile and case conventions

Memo

Company profile and case conventions

Terravane SA (fictitious entity) closes its accounts on 31 December; its functional currency is the euro. Case conventions: amounts in EUR; the fair values at the modification or cancellation date are those of an expert, case data; case convention (pedagogical assumption, not attributed to IFRS 2): the original expense of each plan is recognised separately and is not taken up here; the incremental fair value is computed on the number of options expected to vest; the entries are illustrative.

Modification, cancellation and change of classification of an award: incremental expense, accelerated expense, payment and difference in profit or loss: Plan D — replacement by options

Beneficial and non-beneficial modification, cancellation with payment and change of an award from cash-settled to equity-settled

6 documents9 sections to document
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Guided mode

Section 1 of 9

Objective

In progress
Section brief
What to document
The engagement, its scope and the working mode chosen.
Why
A workpaper answers one precise question: framing it avoids off-topic work.
How
Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
Expected result
You know which question the workpaper must settle, and for which reporting date.
Your role
Preparer of the IFRS 2 workpaper
Level
Advanced
Estimated time
≈ 75 min
Progress
0 / 5 steps done (review excluded)

Context

Terravane SA (fictitious entity) closes its accounts on 31 December. It modified or cancelled four awards made on 1 January 20X6 with a four-year vesting period: an option plan whose exercise price is lowered (A), a plan whose exercise price is raised (B), a plan cancelled against a payment (C) and a plan of rights payable in cash turned into options (D). You prepare the treatment of each change and the entries.

Assignment

Modifications, cancellation and change of classification of the Terravane plans

Purpose of the workpaper

Record the original terms and the modified terms, the original and modified fair values at the modification date, the cumulative expense already recognised and any payment to the counterparty. Quantify the incremental fair value and the part to recognise at the closing date, the accelerated expense of a cancellation, the excess of a payment over the fair value of the instruments repurchased or the difference of a modification from cash-settled to equity-settled, then prepare the entries. The fair values, the elapsed shares and the amounts are case data; no amount is imposed by the standard.

Questions of the file covered by this workpaper

  • Plans A and B: is the modification beneficial? What happens to the minimum expense of plan B?
  • Plans A and B: compute the incremental fair value.
  • Plan A: compute the additional expense of 20X8.
  • Plan C: what is the treatment of the cancellation and of the payment?
  • Plan C: compute the accelerated expense.
  • Plan C: compute the excess of the payment over the fair value of the instruments repurchased.
  • Plan D: what is the treatment of the change to equity settlement?
  • Plan D: compute the difference recognised in profit or loss.

Documents in the file

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