Vesting condition for share-based payment

Hi Sir,

Suppose I have a case that 500 shares options at fair of $10/share is offer to a director on 1/1/X1 for a 3-year vesting period with a non-market condition that the average sale growth throughout the vesting period >5%.

Lets say on 31/12/X1 the company expect that average sales growth for 3 years will be 7% –> recognise expense =10x3x1/3= $10

On 31/12/X2, the company expect that average sales growth for 3 year period is only 4%. As the condition is non-market condition, the vesting condition is not met and there should be no expense recognised. Will we need to reverse the $10 recognised in X1 as an income in X2 and reverse the equity?

On 31/12/X3, actual 3-year sales growth is 6%, meeting the condition. Therefore full amount of share-based payment should be made. Fair value of the share on this date is $20. How should I treat the situation depending on the result of the X2 treatment? Also does the actual share price on vesting date affect the share-based expense or we only care about the fair value at grant date?

Also at the vesting date, I’m not sure what is the accounting entry happen to the entity regarding the actual share? Will there a reversal of other equity reserve (recognised for the options) and transfer to share capital + share premium account?

Thanks for your help, this is quite a long question. I tried to find a question in the book with similar scenario but still could not :(.