6.2 Modification Date
To determine the accounting period in which to record any incremental compensation cost resulting from an award’s modification as well as to measure the modification’s effect, an entity must establish a modification date. For example, if the award is fully vested, the entity recognizes any incremental cost entirely on the modification date. When establishing the modification date, the entity considers the same conditions it does when establishing the grant date for the original share-based payment award.
As discussed in Section 3.2, a grant date is generally considered to be the date on which all of the following conditions have been met:
- The entity and grantee have reached a mutual understanding of the key terms and conditions of the share-based payment award (see Sections 3.2.2, 3.2.3, and 3.2.5).
- The grantee begins to benefit from, or be adversely affected by, subsequent changes in the price of the entity’s equity shares for equity instruments (see Section 3.2.4).
- All necessary approvals have been obtained. Awards made under an arrangement that is subject to shareholder approval are not deemed to be granted until that approval is obtained unless approval is essentially a formality (or perfunctory). For example, if shareholder approval is required but management and the members of the board of directors control enough votes to approve the arrangement, shareholder approval is essentially a formality or perfunctory. Similarly, individual awards that are subject to approval by the board of directors, management, or both are not deemed to be granted until all such approvals are obtained (see Section 3.2.1).
- For awards to employees, the recipient meets the definition of an employee (see Section 2.2 for guidance on the definition of an employee).