Modification, cancellation and change of classification of an award: incremental expense, accelerated expense, payment and difference in profit or loss

Context

Belmora SA (fictitious entity) closes its accounts on 31 December 20X7. The preparer builds the file of its two share-based plans, submitted to a review check: an option plan for managers, settled in shares and modified during the year, and a plan of share appreciation rights for executives, settled in cash. Teaching simulation: the review trail of the file (preparation, reviewer notes and final sign-off) is simulated for demonstration purposes; it is neither a real review nor a validation of the content.

Assignment

Modification of plan 1

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

• Modification: compute the incremental fair value.
• Modification: compute the additional expense of 20X7.

• MemoCompany profile and file conventionsOpen
• ContractRules of plan 1 (options)Open
• ScheduleManagement estimates and ledger of plan 1Open
• MinutesMinutes of the modification of plan 1Open
• ContractRules of plan 2 (share appreciation rights)Open
• ScheduleValuation of the rights at 31 December 20X7Open
• MemoManagement note on the expected numbersOpen
• MemoInputs of the valuation of the plansOpen
• MemoAcceptance letters of the executivesOpen
• InvoiceLegal fees invoiceOpen