Determination of grant date
Scenario 1
On 1 January 2013 an entity advises employees of the terms of a share award designed to reward performance over the three years ended 31 December 2015. The award is subject to board approval, which is given on 1 March 2013. Grant date is 1 March 2013. However, the cost of the award would be recognised over the three year period beginning 1 January 2013, since the employees would have effectively been rendering service for the award from that date.
Scenario 2
On 1 January 2013 an entity’s board resolves to implement a share scheme designed to reward performance over the three years ended 31 December 2015. The award is notified to employees on 1 March 2013. Grant date is again 1 March 2013. Prima facie, in this case, the cost of the award would be recognised over the two years and ten months period beginning 1 March 2013, since the employees could not be regarded as rendering service in January and February for an award of which they were not aware at that time.
However, if a similar award is made each year, and according to a similar timescale, there might be an argument that, during January and February 2013, employees are rendering service for an award of which there is high expectation, and that the cost should therefore, as in Scenario 1, be recognised over the full three year period. The broader issue of the accounting treatment for awards of which there is a high expectation is addressed in the discussion of matching share awards at below.
Scenario 3
On 1 January 2013 an entity advises employees of the terms of a share award designed to reward performance over the three years ended 31 December 2015. The award is subject to board approval, which is given on 1 March 2013. However, in giving such approval, the Board makes some changes to the performance conditions as originally communicated to employees on 1 January. The revised terms of the award are communicated to employees on 1 April 2013. Grant date is 1 April 2013. However, the cost of the award would be recognised over the three year period beginning 1 January 2013, since the employees would have effectively been rendering service for the award from that date.