Question

On January 1, 2017, Company One’s Board of Directors approved granting 5,000 stock options to a select group of senior employees. The requisite service period is five years with 20% of the options vesting each year from 2017 to 2021. The fair value of the option is as below:

Jan 1, 2017	$20
Dec 31, 2017	$21
Dec 31, 2018	$22
Dec 31, 2019	$23
Dec 31, 2020	$24
Dec 31, 2021	$25

1. Based on the description in question, determine the type of vesting condition (cliff vs. graded)
2. What is the total compensation expense needed to be recognized under US GAAP for each year from 2017 to 2021?
3. What is the total compensation expense needed to be recognized under IFRS for each year from 2017 to 2021 (round to one decimal point)?

Answer 1

Answer:-

Question No. 01: Time Vesting since the shares are vested at a ratio over the service period.

Question No. 02: Total Compensation expense need to be recognized under US GAAP

Year	Stock	Percentage	Price	Total Compensation Expense
Dec 31, 2017	5000	20%	$ 21.00	$ 21,000.00
Dec 31, 2018	5000	20%	$ 22.00	$ 22,000.00
Dec 31, 2019	5000	20%	$ 23.00	$ 23,000.00
Dec 31, 2020	5000	20%	$ 24.00	$ 24,000.00
Dec 31, 2021	5000	20%	$ 25.00	$ 25,000.00

Question No. 03: Total Compensation expense need to be recognized under IFRS

Year	Stock	Percentage	Price	Total Compensation Expense
Jan 1, 2017	5000	20%	$ 20.00	$ 20,000.00
Jan 1, 2018	5000	20%	$ 21.00	$ 21,000.00
Jan 1, 2019	5000	20%	$ 22.00	$ 22,000.00
Jan 1, 2020	5000	20%	$ 23.00	$ 23,000.00
Jan 1, 2021	5000	20%	$ 24.00	$ 24,000.00

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