CERTYNEX IFRS ACADEMY

A trainee writes: "After the cut in the exercise price, which benefits the executives, we keep recognising the expense computed at the grant date and add nothing: the modification has no effect on profit." What is the error?

He omits to recognise, on top of the original expense, the effect of the modification, which increases the fair value or is otherwise beneficial to the counterparty.

He should replace the original expense with the fair value of the modified options, recognised from the modification date, without keeping the expense measured at the grant date.

He should recognise the effect of the modification directly in equity, without taking it to profit or loss.

He should reverse part of the original expense, since the lower exercise price reduces the cost for the executives.