# IFRS 2 - Share Options Termination of Employment

For a company, with regards to share options, during the year there were some employees whose employment terminated before all of their shares had vested, however employees can exercise vested shares up to 12 months after termination of employment.

So with that, suppose on January 1, 2015 employee John Smith was granted 30,000 options which we valued at \$60,000 using the Black Sholes Model (\$2 per option – suppose it’s the same for all tranches).

December 31, 2015 - \$20,000, 10,000 shares
December 31, 2016 - \$20,000, 10,000 shares
December 31, 2017 - \$20,000, 10,000 shares

Up to June 30, 2016, since using the graded vesting method, the client has taken a cumulative expense of \$20,000 + \$20,000 * (1.5/2) + \$20,000 * (1.5/3) = \$45,000

Suppose John Smith terminates his employment on June 30, 2016. Should I then recalculate the # of shares vested as:

10,000 shares (Jan 1 - Dec 31, 2015) + 5,000 shares (Jan 1 – Jun 30, 2016) = 15,000 X \$2 per option = \$30,000

Is an adjusting entry required to debit Equity for \$15,000 and credit Compensation Expense for \$15,000 to properly reflect the cumulative share based compensation for this employee?

OR
Is total vested shares at June 30, 2016 only the ones on December 31, 2015 = 10,000 shares X \$2 = \$20,000. Therefore an adjusting entry is requried to debit Equity for \$25,000 and credit Compensation Expense for \$25,000?

Can you provide a reference for where your answer is supported in the standards?

edited