Modification, cancellation and settlement

In this lesson

1. 0:00 Modification, cancellation and settlement overview
2. 0:57 Repricing share options worked example
3. 2:29 Year one accounting treatment
4. 3:10 Year two with repricing adjustment
5. 4:40 Year three final vesting recognition
6. 5:22 Cancellations and settlements as vesting acceleration
7. 6:26 Cancelled scheme compensation worked example
8. 7:58 Splitting payments between equity and expense

About this lesson

This video walks you through the treatment of changes to equity instruments (like repricing share options), how to handle accelerated vesting when schemes are cancelled, and how to split payments between equity and expense. You'll work through realistic examples showing how to track fair value changes separately and apply the correct accounting treatment at each stage. Modifications to share schemes require careful handling because changes in fair value must be recognised separately from the original grant. When terms are repriced or conditions change, you calculate the increase in fair value from the modification date and recognise it over the remaining vesting period—keeping it distinct from the original fair value recognition. The video demonstrates this with a worked example involving repricing, showing how to manage multiple vesting elements across different years. Cancellations and settlements are treated as an acceleration of vesting. Rather than spreading recognition over the remaining vesting period, you immediately recognise the full amount that would have vested eventually. When cash payments are made to employees, you split the treatment: amounts up to the fair value of the options are deducted from equity, while any excess paid is recognised as an expense. The video shows this distinction clearly using a practical cancellation scenario with compensation payments.

Duration: 9m