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I watched Webinar provided by Acca for SBR and saw that there is a part about ‘variable service condition’ which I had never studied before under share-based payment. I had only seen performance condition in detail and service condition in short but never seen that there is different type of service conditions, variable and fixed. Is variable service condition included in the syllabus for SBP?
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Variable service condition is part of IFRS 2. It is an easy topic. You may have studied it in performance conditions but it may not have been specifically mentioned thats why it seemed a new thing to you. I’ll explain using two examples.
Example 1:
All employees will be given 100 shares each in return for 3 years service.
This is a fixed service condition. The employees will have to remain in the company for 3 years to be eligible for the scheme. The time period is fixed and known i.e. 3 years.Example 2:
All employees will be given 100 shares if sales reach $500m within the next 6 years.
Now this is a variable service condition as time period is not fixed. It is possible that the target may be met in year 1, year 2, or year 5, which will trigger the eligibility of employees for scheme. Since we don’t know when the condition will be met i.e. the length of the service period is unknown therefore it is termed variable.Hope it helps.
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