CERTYNEX IFRS ACADEMY

Alba SA granted an executive two tranches of options. Tranche 1: three years of service and a target cumulative operating profit. Tranche 2: three years of service and a target share price. The executive stays three years; at the end of the period, the target profit is not reached (tranche 1) and the target price is not reached (tranche 2). What is the effect on the cumulative expense of each tranche?

Tranches 1 and 2: cumulative expense reversed, because the targets set by the agreement are not reached for both tranches.

Tranche 1: cumulative expense reversed, as the options do not vest; tranche 2: cumulative expense kept, the market condition being in the fair value.

Tranches 1 and 2: cumulative expense kept, because the executive stayed three years and rendered all the expected services.

Tranche 1: cumulative expense kept, because the service is rendered; tranche 2: cumulative expense reversed, because the target price is missed, the market condition being an ordinary vesting condition.