prepare any necessary entries in e s financial statements as at dec 31 for the years 613342

Increase in number of equity instruments or modification of vesting conditions?

An entity grants a performance-related award which provides for different numbers of options to vest after 3 years, depending on different performance targets as follows.

Profit growth	Number of options
5% – 10%	100
over 10% – 15%	200
over 15%	300

During the vesting period, the entity concludes that the criteria are too demanding and modifies them as follows.

Profit growth	Number of options
5% – 10%	200
over 10%	300

This raises the issue of whether the entity has changed:

(a) the performance conditions for the vesting of 200 or 300 options; or

(b) the number of equity instruments awarded for achieving 5%-10% or over 10% growth.

In our view, the reality is that the change is to the performance conditions for the vesting of 200 or 300 options, and should therefore be dealt with as in 7.3.1.C , rather than 7.3.1.B , above. Suppose, however, that the conditions had been modified as follows.

Profit growth	Number of options
5% – 10%	200
over 10% – 15%	300
over 15%	400

In that case, there has clearly been an increase in the number of equity instruments subject to an award for an increase of over 15% growth, which would have to be accounted for as such (i.e. under 7.3.1.B , rather than 7.3.1.C , above). In such a case, it might seem more appropriate to deal with the changes to the lower bands as changes to the number of shares awarded rather than changes to the performance conditions.