No remeasurement after the grant date

Learning objectives

• Explain that the fair value of an equity-settled award is not remeasured after the grant date, except in the case of a modification.L2
• Account for the exercise of options (cash received and reserve transferred).L2

Normative references

• IFRS 2 §11For employees and others providing similar services, the fair value of the services received is measured by reference to the fair value of the equity instruments granted, because it is typically not possible to estimate it reliably (equity instruments are granted in addition to salary and other benefits); the fair value of the instruments is measured at the grant date.
• IFRS 2 §27Irrespective of any modifications, cancellations or settlements, the entity recognises, as a minimum, the services received measured at the grant-date fair value of the original equity instruments, unless they do not vest because of failure to satisfy a non-market vesting condition specified at that date; it also recognises the effects of modifications that increase the total fair value of the arrangement or are otherwise beneficial to the employee (application guidance in Appendix B).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• Lumen's share price has doubled since the grant of an equity-settled option plan; Lumen therefore remeasures the plan's reserve upwards at each closing, until exercise.L2
• Orsay SA issues 15,000 shares on exercise of options under an equity-settled plan; it receives {cash_received} as the exercise price. The share-based payment reserve built up for these options, measured at the grant date, is {reserve_released}. Case convention: the reserve is cleared to share capital and premium on exercise. Record the exercise entry.L2