Accounting for employee options under IFRS (see description)

Discussion in 'Technical Queries' started by DavidTheQuestion, Dec 16, 2016.

  1. DavidTheQuestion


    Dec 16, 2016
    Likes Received:
    If a starting company is issuing share options (option for own equity) for its employees (shares are not openly traded) should it show it as an expense and make a reserve for it

    D Expenses - 95

    C Reserve (options) - 95

    if the following conditions exist: the nominal value of the share is 10 USD, fair value of the share (using a cash flow method could be 100 USD), and exercise price is 5 USD. Using a Black Scholes method - the value could be something like 95 USD, and option can be exercised in 3 years. Btw - the last year company had a huge net loss.

    Also, what will be the closing procedures when the option is exercised:

    D Cash - 5

    D Loss (option) - 5

    C Own shares/equity -10

    What will happen with reserve?

    D Reserve (liability) - 95

    C Not operat. income 95

    In that case what is the point of this reserve?

    Thank you!
    DavidTheQuestion, Dec 16, 2016
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