CERTYNEX IFRS ACADEMY

An analyst computes the cumulative expense at the end of year three of a four-year plan using the fair value of all the options granted: 600,000 × 75% = 450,000. The entity nevertheless expects only 80% of the options to vest. What is the error?

She should use the fair value of the options at the end of the third year, and not that of the plan's grant date.

She should spread the expense over the contractual life of the options, and not over the four years of the plan's vesting period.

She should deduct the first-year expense before applying the elapsed share to the options granted.

She applies the number of options granted and not the number of options expected to vest at the closing date.