On 1 July 2013 Pepper Limited granted 500 share options to each of its 100 employees. Each grant is conditional on the employee working for the company for the next two years. The fair value of each option is estimated to be $3.00. Pepper estimates that 8% of its employees will leave during the two year period and therefore forfeit their rights to the share options.
During the year ended 30 June 2014 five employees left. At this time the company revised its estimate of total employee departures over the full two-year period to 10%.
During the year ended 30 June 2015 a further 4 employees left.
The amount to be recognised as an expense by Pepper for the year ended 30 June 2014 is:

Question

Quizplus · Accepted Answer

The expense for the year ended 30 June 2014 is calculated as follows: 500 options x 100 employees x $3.00 fair value x (1 - 10% estimated departures) x 1/2 (for one year of the two-year vesting period) = $67,500.

On 1 July 2013 Pepper Limited Granted 500 Share Options