N 1 January 2023 an entity, Hexaware, granted share options to each of its 210 employees, subject to a three-year vesting period, provided that the volume of sales increases by a minimum of 5% per annum throughout the vesting period. A maximum of 450 share options per employee will vest, dependent upon the increase in the volume of sales throughout each year of the vesting period as follows:
If the volume of sales increases by an average of between 5% and 10% per year, each eligible employee will receive 200 share options.
If the volume of sales increases by an average of between 10% and 15% per year, each eligible employee will receive 300 share options.
If the volume of sales increases by an average of over 15% per year, each eligible employee will receive 450 share options.
At the grant date, Hexaware estimated that the fair value of each option was $25 and that the increase in the volume of sales each year would be between 10% and 15%. It was also estimated that a total of 22% of employees would leave prior to the end of the vesting period. At each reporting date within the vesting period, the situation was as follows:
Reporting date | Employees leaving in year | Further leavers expected prior to vesting date | Annual increase in sales volume | Expected sales volume increase over remaining vesting period | Average annual increase in sales volume to date
---|---|---|---|---|---
31 Dec 2023 | 14 | 27 | 14% | 14% | 14%
31 Dec 2024 | 3 | 4 | 18% | 16% | 16%
31 Dec 2025 | 1 | | 16% | 16% | 16%
Required:
Calculate the impact of the above share-based payment scheme on Heaware's financial statements in each reporting period.
