Bravado – Share based payments (June 09)

Hello,

I am having some difficulties with answering Q1 (a) section vii) and was wondering if anyone would be kind enough to help me realise the answer.

On 1 June 2007, Bravado had made an award of 1,000 share options to each of its 2,000 employees. The
employees had to remain in employment for the vesting period of three years. The fair value of each option on
1 June 2007 was £6. The share price of Bravado dropped during 2007 and the management decided to reduce
the exercise price of the share options. Thus on 1 June 2008, the fair value of the original share options was £2
and the fair value of the repriced option was £3. At the date of the award and 31 May 2008, management
estimated that 10% of employees would leave the company before the vesting date. During the year to 31 May
2009, it was determined that the number of employees leaving would only be 7%. Bravado had accounted for
the options in the financial statements to 31 May 2008.

some parts of the answer I understand fully,
expense (yr 1) = options x retained employees x fv option price x duration
= 1000 x (2000 x 0.9) x £6 x (1/3) = £3.6m

what confuses me is the expense for the second year:
= 1000 x (2000 x 0.93 (revised retained employees)) x ((£6 x 2/3) + (1 x (1/2)))

why is £6 still included? (hasn’t the value been reduced, so to reflect the change the current fair value price shouldn’t £3 be used?)
in addition to this why is ‘(1 x (1/2))’ included in the answer? I’ve deduced that it is to do with the difference in value of the original share value (£2) and the repriced option (£3), multiplied by the vested period of 1 out of the 2 years that remain from the original vesting period of 3 years.

I am having more difficulty with this question the longer I look at it. Can someone put me out of my misery please? 🙁

If any further information is required I will be happy to provide it. Thank you for taking the time to view this problematic question.