Share based payments migraine

cornflower

Can anyone help me with this question please - poss one for Steve?

On 1 January 2012 Aslam Inc grants employees shares if they are still in employment 3 years after the grant. They will receive:

1. No shares if share price is below C10.00
2. 100 shares if share price is in the range if C10.00 to C14.99
3. 150 shares if share price is in the range of C15.00 to C19.99
4. 180 shares if share price is C20 or more

How should the share awards be valued?

I have no idea where to start. I feel a bit out of my depth with these things

Steve Collings

Essentially Aslam has made 3 awards which you will value like this:

1. 100 shares if the employees remain in service for 3 years and the share price is in the range of C10 to C14.99.
2. 50 shares (150-100) shares if the employee remains in service for 3 years and the sahre price is in the range of C15.00 and C19.99.
3. 30 (180-150) shares if the employee remains in service for 3 years and the share price is C20 or more.

You ignore the impact of the 3 year service agreement because this is a non-market vesting condition, but you must take account of the share price target. This results in each tranche of the award being subjected to an increasing level of discount which reflects the relative probability of the share price target in respect of each tranche of award being met. What happens then is that all 3 awards would be expensed over the 3 year service period. The share awards would only be forfeited if the awards lapsed because of the employee leaving during the period.

I hope that helps you.

Regards
Steve

cornflower

That's fab Steve thank you soooo much it was doing my head in.

You make it sound so easy as well.

C x