Modification Of Feasible Right Conditions And Clauses

Usually, after the entry into force of the share agreement, the terms and conditions should not be modified at will.

In accounting, regardless of the terms and conditions of the equity instruments already granted.

1. favorable amendments to terms and conditions

Enterprises should confirm the following situations

(1) if the amendment increases the fair value of the equity instruments granted, the enterprise shall accordingly confirm the increase in the service in accordance with the increase in the fair value of the equity instruments.

The increase in the fair value of equity instruments refers to the difference between the fair value before and after modification of the equity instruments.

(2) if the amendment increases the number of equity instruments granted, the fair value of the increased equity instruments should be recognized as an increase in services.

(3) if an enterprise modifies the feasible right conditions in accordance with the way that is beneficial to the employees, such as shortening the waiting period, changing or canceling the performance conditions (non market conditions), the enterprise should consider the amended feasible right conditions when handling the feasible right conditions.

Note: favorable amendments to employees are taken into account.

2. adverse amendments to terms and conditions

If an enterprise modifies the terms and conditions in order to reduce the total value of the fair value of shares or other ways that are not conducive to the employees, the enterprise shall continue to make accounting treatment of the services obtained, as if the change had never occurred unless the enterprise cancelled some or all of the equity instruments already granted.

These include the following situations:

(1) if the modification reduces the fair value of the equity instruments granted, the enterprise shall continue to confirm the amount of the services obtained on the basis of the fair value of the equity instruments on the date of granting, rather than considering the reduction of the fair value of the equity instruments.

(2) if the amendment reduces the number of equity instruments granted, the enterprise should reduce the portion as a cancellation of the granting of equity instruments.

(3) if an enterprise modifies the exercise conditions in a manner that is not conducive to the employees, such as extending the waiting period, increasing or changing the performance conditions (non market conditions), enterprises should not consider the amended feasible right conditions when handling the feasible right conditions.

Note: any adverse changes to employees are not considered.

3. cancellation or settlement

If an enterprise has cancelled the granting of equity instruments or settled the rights and interests granted by the company during the waiting period (except for those that have not been satisfied with the exercise of the right conditions), the enterprise shall:

(1) to cancel or settle accounts as an accelerated processing of rights, and immediately confirm the amount that should have been confirmed during the remaining waiting period.

(2) all payments paid to the employees at the time of cancellation or settlement shall be treated as a repurchase of the rights and interests, and the amount of the repurchase payment shall be higher than that of the equity instrument in the fair value of the repurchase date, and shall be included in the current cost.

(3) if a new equity instrument is granted to the employee and the new equity instrument granted on the new equity instrument date is used to replace the cancelled equity instrument, the enterprise shall treat the award of the alternative equity instrument in the same way as the original terms and conditions of the original equity instruments are modified.

The increase in the fair value of equity instruments refers to the difference between the fair value of the substitute equity instrument and the net fair value of the cancelled equity instrument on the granting date of the substitute equity instrument.

The net fair value of the cancelled equity instruments refers to the fair value immediately measured before the cancellation, minus the amount paid for the employees' rights and interests repurchase as a result of the cancellation of the original equity instruments.

If an enterprise fails to identify the newly granted equity instruments as a substitute for equity instruments, it shall be treated as a newly granted share payment.

If an enterprise repurchases the equity tool that its employees have already exercised, it shall debit the owner's equity and the amount of the repurchase payment is higher than that of the equity instrument in the fair value of the repurchase date, and shall be included in the current cost.