CERTYNEX IFRS ACADEMY

Orsay SA raises the exercise price of options granted to its executives with three years of service, which is unfavourable to them; the fair value of all the options falls by 10,000 at the modification date. The total grant-date fair value of the original options was 120,000 (case data). What is the effect on the expense?

The expense is reduced by the fall in fair value of 10,000, because the terms have become less favourable for the executives.

The options are remeasured at the modification date and the cumulative expense is recomputed on that new fair value basis, disregarding the fair value of the original options.

The expense continues to be recognised at least on the basis of the grant-date fair value of the original options, with no reduction because of the modification.

The original expense is reversed in full, the modification being equivalent to a cancellation of the initial plan.