International Financial Reporting Standards_guide.pdf

Chapter 29 Share-Based Payment (IFRS 2) 319
The weighted average share price at the date of exercise for share options exercised during
the period was €53.69. The options outstanding at December 31, 20X5, had a weighted average
exercise price of €66.33, and a weighted average remaining contractual life of 8.64 years.
The inputs into the Black-Scholes model were as follows:
20X4
20X5
Weighted average share price 68.34 69.68
Weighted average exercise price 68.34 69.68
Expected volatility 40% 35%
Expected life 3–8 years 4–9 years
Risk-free rate 3% 3%
Expected dividends none none
Expected volatility was determined by calculating the historical volatility of the Group’s
share price over the previous nine years. The expected life used in the model was adjusted,
based on management’s best estimate, for the effects of nontransferability, exercise restrictions,
and behavioral considerations.
During 20X5, the Group repriced certain of its outstanding options. The strike price was
reduced from €82.93 to the then-current market price of €69.22. The incremental fair value of
€125,000 will be expensed over the remaining vesting period (two years). The Group used the
inputs noted above to measure the fair value of the old and new shares.
The Group recognized total expenses of €775,000 and €750,000 related to equity-settled sharebased
payment transactions in 20X4 and 20X5, respectively.
Cash-settled share-based payments
The Group issues to certain employees share appreciation rights (SARs) that require the
Group to pay the intrinsic value of the SAR to the employee at the date of exercise. The
Group has recorded liabilities of €1,325,000 and €1,435,000 in 20X4 and 20X5, respectively.
Fair value of the SARs is determined using the Black-Scholes model using the assumptions
noted in the above table. The Group recorded total expenses of €325,000 and €110,000 in 20X4
and 20X5, respectively. The total intrinsic value at 20X4 and 20X5 was €1,150,000 and
€1,275,000, respectively.
Other share-based payment plans
The employee share purchase plans are open to almost all employees and provide for a purchase
price equal to the daily average market price on the date of grant, less 15 percent. The
shares can be purchased during a two-week period each year. The shares so purchased are
generally placed in the employee share savings plan for a five-year period. Pursuant to these
plans, the Group issued 2,123,073 ordinary shares in 20X5 at a weighted average share price
of €64.35.