Hi, I have some questions again. Hope that you would like to answer my questions. Thank you.

For share-based payment.

It states that
Peforemance condition
If the condition is specifically related o the market price of the company's shares, then such conditions are ignored for the purpose of estimating the number of equity shares that will vest.

Why is the market condition ignored because whether or not a person can receive it depends on the market condition (like targeted share price or targeted sales), right?

Second,
value= fair value at the grant day
I stated that
The fair value of the options will be calculated at the date the options are granted, but I saw one example say that:


A public limited company has granted 700 share appreciation rights to each of its 400 employees on 1 Jan 2006. The rights are due to vest on 31 December 2008 with payment being made on 31 December 2009.

During 2006, 50 employees leave, and it is anticipated tht a further 50 employees will leave during the vesting period. Fair values of the SARs are as follows:

1 Jan 2006 = $15
31 Dec 2006= $18
31 Dec 2007 = $ 20


The answer is that 700 x (400-100) x $18 x 1/3 = 1 260 000

My question is that why we should use the fair value at the end of the year, but it was granted on 1 Jan 2006.
Why not use $15(on the grand day)for the calculation?

Thank you very much

Steven

Market Condition is ignored because it has already been taken in to account when estimating the fair value of Options at grant date(it is estimated for example by using Black Schole's model by taking in to account the possibility that share options will or won't vest).



For equity setteled share based payment trasaction it is true that we use fair value of options at grant date irrespective of its variation at subsequent periods but SHARE APPRECIATIONS RIGHTS is an example of CASH SETTELED SHARE BASED PAYMENT TRANSACTION in which case a liability is booked(NOT EQUITY) so liability should be measured at fair value at each balance sheet date that is why in case of share appreciation rights you will always see that the liabilty is booked at each year end fair value(NOT AT THE FAIR VALUE AT GRANT DATE), For example 500 SARs(Share Appreciation Rights) are given and they will vest by the end of 3rd year so if the fair value of SARs is $5(at the end of year 1), $6(at the end of year 2) and $7(at the end of year 3), then we will reacord the liability as;

At the end of Year 1
(500SARs*$5)/3*1==>

At the end of Year 2
(500SARs*$6)/3*1==>

At the end of Year 3
(500SARs*$7)/3*3


Hope this explanation helps you.

Regards,

Muhammad Amir

Yes, This explanation really helps.

Thank you for your kind hope.


Steven