Skip to main content
IFRS Academy

CERTYNEX IFRS ACADEMY

My account — Professional

Search the Academy

Home
My learning path
Exercises & quizzes
Cases
Workpapers
Exams
My progress

Workpapers

Workpaper template

WorkpaperIFRS 2 — Share-based PaymentL3 · L4

Modification, cancellation and change of classification of an award: incremental expense, accelerated expense, payment and difference in profit or loss

5 missions9 sections to document75 min
Prepared by
AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

Record the original terms and the modified terms, the original and modified fair values at the modification date, the cumulative expense already recognised and any payment to the counterparty. Quantify the incremental fair value and the part to recognise at the closing date, the accelerated expense of a cancellation, the excess of a payment over the fair value of the instruments repurchased or the difference of a modification from cash-settled to equity-settled, then prepare the entries. The fair values, the elapsed shares and the amounts are case data; no amount is imposed by the standard.

9 sections · 30 blocks · 8 calculations · 4 entries

  • IFRS 2 §27
  • IFRS 2 §26
  • IFRS 2 §28

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

5 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Beneficial and non-beneficial modification, cancellation with payment and change of an award from cash-settled to equity-settled
Case tasks documented here
  • Plans A and B: is the modification beneficial? What happens to the minimum expense of plan B?
  • Plans A and B: compute the incremental fair value.
  • Plan A: compute the additional expense of 20X8.
  • Plan C: what is the treatment of the cancellation and of the payment?
  • Plan C: compute the accelerated expense.
  • Plan C: compute the excess of the payment over the fair value of the instruments repurchased.
  • Plan D: what is the treatment of the change to equity settlement?
  • Plan D: compute the difference recognised in profit or loss.
1

Facts and data

Inputs

  • Original terms: instruments, conditions, vesting period, settlement method

    TextRequired

    OPTIONS_GRANTED_ON_1_JANUARY_20X6_VESTING_OVER_FOUR_YEARS

  • Change: nature, date, beneficiaries and effect on the conditions

    TextRequired

    EXERCISE_PRICE_LOWERED_ON_1_JANUARY_20X8_ALL_OPTIONS_UNCHANGED_OTHERWISE

  • Total fair value of the original award at the modification date (case data)

    Number

    27,000

  • Total fair value of the modified award at the modification date (case data)

    Number

    45,000

  • Elapsed share of the period remaining since the modification (%, case data)

    Number

    50 %

  • Total cost of the award at the grant date (case data)

    Number

  • Cumulative expense already recognised

    Number

  • Payment to the counterparty on cancellation or settlement (case data)

    Number

  • Fair value of the instruments repurchased at the repurchase date (case data)

    Number

  • Liability derecognised at the modification date (case data)

    Number

  • Amount recognised in equity: fair value at the modification date to the extent of the services received (case data)

    Number

2

Supporting documents

Evidence

  • Documents obtained and referenced (decision on the modification or cancellation, valuations at the modification date, payment agreement)

    EvidenceRequired

3

Analysis of a modification, a cancellation or a change of classification

Analysis

IFRS 2 §27IFRS 2 §26IFRS 2 §28IFRS 2IFRS 2

  • Points examined: modification, cancellation and change of classification

    ChecklistRequired

    • At a minimum, services recognised at the grant-date fair value of the original instruments, unless they fail to vest because of an original condition
    • Beneficial modification: incremental fair value = modified fair value − original fair value at the modification date, recognised over the remaining period
    • Non-beneficial modification: no reduction of the minimum expense
    • Cancellation or settlement during the vesting period: remaining expense recognised immediately
    • Payment to the counterparty: repurchase of equity, excess over fair value as an expense
    • Cash-settled becoming equity-settled: liability derecognised, equity at the fair value at the modification date, difference in profit or loss
4

Calculations

Calculations

IFRS 2 §26IFRS 2 §27IFRS 2 §28

  • Incremental fair value (modified fair value − original fair value)

    Calculation

    18,000

    Total fair value of the modified award at the modification date (case data) ; − Total fair value of the original award at the modification date (case data)

  • Incremental fair value retained (positive part)

    Calculation

    18,000

    Total fair value of the modified award at the modification date (case data) ; − Total fair value of the original award at the modification date (case data)

  • Cumulative incremental expense (incremental fair value × elapsed share of the remaining period)

    Calculation

    9,000

    Incremental fair value retained (positive part) ; Elapsed share of the period remaining since the modification (%, case data)

  • Accelerated expense (total grant-date cost − cumulative expense already recognised)

    Calculation

    0

    Total cost of the award at the grant date (case data) ; − Cumulative expense already recognised

  • Excess of the payment over the fair value of the instruments repurchased (positive part)

    Calculation

    0

    Payment to the counterparty on cancellation or settlement (case data) ; − Fair value of the instruments repurchased at the repurchase date (case data)

  • Difference in profit or loss (liability derecognised − equity recognised)

    Calculation

    0

    Liability derecognised at the modification date (case data) ; − Amount recognised in equity: fair value at the modification date to the extent of the services received (case data)

  • Gain in profit or loss from the modification (positive part of the difference)

    Calculation

    0

    Liability derecognised at the modification date (case data) ; − Amount recognised in equity: fair value at the modification date to the extent of the services received (case data)

  • Loss in profit or loss from the modification (negative part of the difference)

    Calculation

    0

    Liability derecognised at the modification date (case data) ; − Amount recognised in equity: fair value at the modification date to the extent of the services received (case data)

5

Illustrative entries

Entries

  • Entry of the incremental expense

    Entry

    AccountDebitCredit
    Services expense9,000
    Share-based payment reserve9,000

  • Entry of the accelerated expense

    Entry

    Debit Services expense ← Accelerated expense (total grant-date cost − cumulative expense already recognised) ; Credit Share-based payment reserve ← Accelerated expense (total grant-date cost − cumulative expense already recognised)

  • Entry of the payment to the counterparty

    Entry

    Debit Reserve (repurchase of equity) ← Fair value of the instruments repurchased at the repurchase date (case data) ; Debit Services expense (excess over fair value) ← Excess of the payment over the fair value of the instruments repurchased (positive part) ; Credit Cash paid ← Payment to the counterparty on cancellation or settlement (case data)

  • Entry of the change of classification

    Entry

    Debit Liability derecognised ← Liability derecognised at the modification date (case data) ; Credit Share-based payment reserve ← Amount recognised in equity: fair value at the modification date to the extent of the services received (case data) ; Credit Difference in profit or loss (gain) ← Gain in profit or loss from the modification (positive part of the difference) ; Debit Difference in profit or loss (loss) ← Loss in profit or loss from the modification (negative part of the difference)

6

Judgment: whether the modification is beneficial

Judgment

IFRS 2 §27IFRS 2 §26IFRS 2 §28IFRS 2IFRS 2

  • Whether the modification is beneficial

    JudgmentRequired

    Modification beneficial to the counterparty

    Modification beneficial to the counterparty / Modification not beneficial / Cancellation or settlement / Change of classification (cash-settled becoming equity-settled)

    Professional judgment: the effect of the change on the total fair value at the modification date is assessed; a reduction does not lower the minimum expense.

  • Rationale: effect of the change on the total fair value and on the vesting conditions

    Text

    THE_FAIR_VALUE_OF_EACH_OPTION_RISES_FROM_3_TO_5_EUR_AT_THE_MODIFICATION_DATE

7

Effect on the financial statements

FS impact

  • Effect derived from the entries

    Table

8

Conclusion

Conclusion

  • Whether the change is beneficial, incremental or accelerated expense, treatment of the payment and difference in profit or loss, with the fair values at the modification date

    ConclusionRequired

9

Normative references

References

  • Normative references cited in this workpaper

    References

10

Checks and financial statement impact

  • Original terms describedPass
  • Change describedPass
  • Beneficial nature judged and supportedPass
  • Payment = fair value repurchased + excessNot evaluated
  • Incremental expense entry balancedPass
  • Accelerated expense entry balancedNot evaluated
  • Payment entry balancedNot evaluated
  • Change-of-classification entry balancedNot evaluated
Assets
0
Liabilities
0
Profit or loss
-9,000
OCI
0
Equity
0