Update the service-condition estimate behind employee share awards

An employee's departure can change the number of awards expected to vest, but the accounting depends on the award's terms and classification. Obtain the grant agreement, vesting schedule and departure documentation. Establish whether service ended before vesting and whether any negotiated change preserved or accelerated the employee's rights.

This review concerns equity-settled awards under IFRS 2 with service conditions. The estimate of instruments expected to vest reflects relevant nonmarket vesting conditions and is updated as evidence changes. Cash-settled awards and other conditions require their own assessment, so keep the population within the approved scope.

Compare the award register with human-resources records for starters, departures, leave and transfers. Preserve the effective dates and ask the responsible reviewer how each event affects the contractual service requirement. A payroll termination code is operational evidence, not a complete interpretation of an award agreement.

Investigate differences by employee and grant. An employee can hold several awards with different vesting dates or conditions. Do not remove all grants from the expense model because one award lapsed, and do not retain a departed employee in the expected-vesting population simply because the cap table has not been updated.

Flag company cancellations, replacement awards, settlements and changes made during an employee's exit negotiation. These events may require treatment different from failure to complete an unchanged service condition. Send the actual agreements for review before selecting a forfeiture code in the equity system.

Market and nonvesting conditions also do not follow the same population-adjustment logic as ordinary service conditions. IFRS 2 treats those conditions within its measurement framework. Record which type of condition drives an exception so a failed share-price target is not processed as though the employee had left before completing service.

Retain the approved valuation input, service period, prior expected-vesting count and revised count. Calculate the required cumulative amount under the approved method and compare it with what has already been recorded. This makes the current-period adjustment explainable without replacing the historical expense file.

For a deliberately simplified illustration, 1,000 instruments valued at $6 each over a two-year service period produce $3,000 after one year under an assumed straight-line pattern. If the supported expected-vesting count at that same date is 900, the comparable cumulative amount is $2,700. The $300 difference illustrates the estimate's effect; real grants may have separate tranches or other terms that change the calculation.

At vesting, reconcile the relevant estimate to the awards that actually vested. Keep later exercises, lapses and share issuances as separate events with their own records. Ask the accountant to review their treatment instead of reversing historical service cost automatically when a vested option is never exercised. Archive the approved employee population with the close so the estimate can be reproduced after personnel records change.