Verano SA lowers the exercise price of its executives' options, which benefits them, two years before the end of the vesting period. At the modification date, the fair value of all the modified options is 54,000 and that of the original options is 36,000 (case data, measured at the same date). Case convention: the difference is recognised evenly over the remaining period, of which 50 % has elapsed at the closing date. Compute the incremental fair value, then the cumulative additional expense at the closing date, on top of the original expense.
- Fair value of the modified options at the modification date (case data)
- 54,000
- Fair value of the original options at the modification date (case data)
- 36,000
- Elapsed share of the remaining period (case convention)
- 50 %