Cancellation and settlement: acceleration and repurchase

Learning objectives

• Explain the acceleration of the remaining expense and the treatment of a payment made to the counterparty on cancellation.L2
• Calculate the accelerated expense and the excess of the payment over the fair value of the instruments repurchased.L2, L3

Normative references

• IFRS 2 §28Cancellation or settlement during the vesting period (other than forfeiture for failure to satisfy the vesting conditions): (a) acceleration, the amount that would otherwise have been recognised for services over the remainder of the period being recognised immediately; (b) any payment made to the employee is accounted for as the repurchase of an equity interest, deducted from equity, and any excess over the fair value of the equity instruments granted, measured at the repurchase date, is recognised as an expense (liability components are remeasured and then extinguished); (c) new equity instruments identified as replacements are accounted for as a modification of the original grant, the incremental fair value being measured against the net fair value of the cancelled instruments.

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

2 questions

• Nordis SA cancels, during the vesting period, an equity-settled option plan, with no replacement instrument and no payment to the executives. The total cost of the plan at the grant date was {total_grant_date_cost} (case data) and the cumulative expense recognised up to the cancellation is {cumulative_expense_recognised}. Compute the expense to be recognised immediately at the cancellation date.L2
• Nordis SA cancels an equity-settled option plan and pays the executives {payment_on_cancellation} in cash at the cancellation date. The fair value of the cancelled options at that date is {fair_value_repurchased} (case data). Case convention: the remaining expense has already been accelerated. Record the entry for the payment.L3