Accounting for employee options under IFRS (see description)

[DavidTheQuestion]

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!