Share based payment cancellation

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Feb 25, 2022
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I am confused about share based payment cancellation share based payment reserve account treatment.

Example: Person A is able to meet a non vesting condition for share based payment but decided to not meet the condition, thus cancellation results in accelerated vesting. Assume the yearly expense of vesting is $1000 per year for 3 year vesting period, and Person A chose not the meet the non vesting condition in year 2.

Year 1
Dr staff cost $1000
Cr share based payment reserve $1000

Year 2 (accelerated vesting upon cancellation)
Dr staff cost $2000
Cr share based payment reserve $2000

Question: what do i do with the share based payment reserve balance of $3000 at the end of year 2? should there be a 3rd journal entry to flow this back into retained profits?

Dr share based payment reserve $3000
Cr retained profits $3000

Thanks a lot!
 

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