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Share-Based Payment

Date recorded:

The staff noted that the majority of respondents to ED 2 supported measuring share-based payments at grant date. Respondents believed grant date measurement could be applied either:

  • by measuring all factors at the time of initial recognition and not subsequently adjusting for experience or changes in estimates (the units-of-service approach in ED 2 is an example of this), or
  • by making a best estimate at initial recognition and adjusting for changes in those estimates over time (the approach under FASB Statement 123, Accounting for Stock-Based Compensation, is an example of this).

The staff noted that under ED 2, grant date measurement was used, for practical reasons, as a surrogate for service date measurement, because the Board believed that on grant date the contract was an executory contract and performance only commenced as service was provided.

The staff noted that the majority of respondents did not support the units of service approach, generally citing the difficulties of incorporating performance conditions into measurement. After discussion, the Board agreed not to retain the units of service approach that was proposed in ED 2 and, instead, to use the approach set out in SFAS 123.

The Board agreed the following:

  • To use a grant date measurement model (vote 12-1).
  • To include an estimate of performance and vesting conditions within this measurement and adjust thereafter for changes in the estimates (vote 10-3).
  • To use this approach for practical reasons (vote 11-2).
  • There should be no reversal of expenses where the option vests but is not exercised (vote 13-0).
  • The expense should be recognised over the vesting period (vote 11-2).

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