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Wiley lFRS: Practical Implementation Guide and Workbook
9.1.1.1 The existing IFRS 2 did not specify other features of "vesting conditions." In other
words, the Standard, as it exists currently, is silent on this aspect of ves ting conditions. The recent
amendment to IFRS 2 clarifies this beyond doubt by restricting the defini tion of "vesting condi–
tions" to service conditions and performance conditions and by amending the definition of "per–
formance conditions" to require the completion of a service period in additi on to specified per–
formance targets. Therefore, under the revised IFRS 2, all features of a share-based paymen t ar–
rangement other than serv ice conditi ons and performance cond ition s will be considered to be non–
vesting conditions.
9.1.1.2 Furthermore, the revised IFRS 2 also clarifies that in determining "fair value" of equity
instruments granted (under a share-based payment arrangement), an entity shall take into account
(a) All nonvesting conditi ons (i.e. all conditions other then service and performance condi–
tions); and
(b) Vesting conditions that are market conditions (for instance , a stipulation that is related to a
counterparty achieving a cert ain predeterm ined level of market price of the entit y' s equity
instruments).
9.1.2 Failure to meet a nonvesting condition and cancellations.
Once again, this revision is more a clarification as opposed to a chan ge in the requirements of IFRS
2. While the present IFRS 2 describes the treatment of a failure to meet a vesting condition but it
doe s not categorically set out the accounting treatment for a failure to meet a cond ition other than a
vesting cond ition.
9.2 Whil e the existing IFRS 2 describes scenarios wherein an entity canceled share-based pay–
ment arrangements resulting from a failure to meet nonvesting conditions, it does not provide
guidance on accounting treatment that is needed in the followin g situations:
a. Wherein the canc ellation results from an act(s) of the counterparty (say, discontinuance of
payment by an employee of contributions to an employee-savi ng scheme that was a pre–
condition for qualifying for vesting); or
b. Circumstances beyond the control of either the entity or the counterparty leading to non–
fulfillment of a nonvesting condition (say, loss of 10,000 points on a single day within a
certai n month on a specified index of an internationall y recognized stock market).
9.3 The revised IFRS 2 specifically address both of the aforementioned scenarios and prescribes
the follow ing accounting treatment:
a. If the entity or the counterparty have the option to choose as to whether to meet a nonvest–
ing co ndition, a failu re by the enti ty or the counterparty to meet the nonvesting condition
will be treated as a cance llation; or
b. If neither the entit y nor the counterparty has the choice as to whether to meet a non-vesting
condition, a failure to meet this nonvesting condition does not have any accounting effect,
similar to the treatment of market conditions.
If a grant of equity instruments (under a share-based arrangement) is cancelled or settled by the
entity or the counterparty, the entity recognizes immediately the amount of expense that would oth–
erwise have been recognized over the remainder of the vesting period (i.e . the share-based payment
expensed is accelerated and recogni zed immedi ately ). If the share-based payment contains a li–
ability component, the liability should be fair valued at the date of cancellation or settlement. Any
payment made to settle the liability component should be accounted for as an extinguishment of the
liability.
10.
EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS
10.1 AHOLD, Annual Report 2006
Notes to the consolidated financial sta tements
Note 9: Share-Based Compensation
In 2006, Ahold had two main share-based compensation programs: (a) a conditional share grant
program, the Global Reward Opportunity Program ("GRO") and (b) a one-off performance share grant