Page 12 - 20. COMPILER QB - INDAS 102

Q9. (March 2019 – 6 Marks)

A Ltd. had on 1st April, 2015 granted 1,000 share options each to 2,000 employees. The options are due to vest
on 31st March, 2018 provided the employee remains in employment till 31st March, 2018.

On 1st April, 2015, the Directors of Company estimated that 1,800 employees would qualify for the option on
31st March, 2018. This estimate was amended to 1,850 employees on 31st March, 2016 and further amended

to 1,840 employees on 31st March, 2017.
On 1st April, 2015, the fair value of an option was Rs. 1.20. The fair value increased to Rs. 1.30 as on 31st

March, 2016 but due to challenging business conditions, the fair value declined thereafter. In September 2016,
when the fair value of an option was Rs. 0.90, the Directors repriced the option and this caused the fair value

to increase to Rs. 1.05. Trading conditions improved in the second half of the year and by 31st March, 2017

the fair value of an option was Rs.1.25. QA Ltd. decided that additional cost incurred due to repricing of the
options on 30th September, 2016 should be spread over the remaining vesting period from 30th September,
2016 to 31st March, 2018.

The Company has requested you to suggest the suitable accounting treatment for these transaction as on 31st

March, 2017.
SOLUTION

Ind AS 102 requires the entity to recognise the effects of repricing that increase the total fair value of the

share-based payment arrangement or are otherwise beneficial to the employee.

If the repricing increases the fair value of the equity instruments granted paragraph B43 (a) of Appendix B
requires the entity to include the incremental fair value granted (i.e. the difference between the fair value of
the repriced equity instrument and that of the original equity instrument, both estimated as at the date of
the modification) in the measurement of the amount recognised for services received as consideration for the

equity instruments granted.

If the repricing occurs during the vesting period, the incremental fair value granted is included in the
measurement of the amount recognised for services received over the period from the repricing date until the
date when the repriced equity instruments vest, in addition to the amount based on the grant date fair value

of the original equity instruments, which is recognised over the remainder of the original vesting period.
Accordingly, the amounts recognised in years 1 and 2 are as follows
Year Calculation Compensation expense Cumulative compensation
for period expense
Rs. Rs.
1 [1,850 employees× 1,000 7,40,000 7,40,000
options × Rs. 1.20] × 1/3
2 (1,840 employees× 1,000 8,24,000 15,64,000
options × [(Rs.1.20 × 2/3)+
{(Rs.1.05 - 0.90) ×0.5/1.5}] –
7,40,000
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