Past Question 2008 June Q1.5

My question is while calculating Equity, why in the second line of Ans, there is (2/3) instead of (1/3) when we are calculating for the first year 31 May 2008.

Q.1.4 of 2008 June
The directors of Ribby announced on 1 June 2007 that a bonus of $6 million would be paid to the employees
of Ribby if they achieved a certain target production level by 31 May 2008. The bonus is to be paid partly in
cash and partly in share options. Half of the bonus will be paid in cash on 30 November 2008 whether or not
the employees are still working for Ribby. The other half will be given in share options on the same date, provided
that the employee is still in service on 30 November 2008. The exercise price and number of options will be
fixed by management on 30 November 2008. The target production was met and management expect 10% of
employees to leave between 31 May 2008 and 30 November 2008. No entry has been made in the financial
statements of Ribby.

ANS:
Bonus to employees of Ribby
A liability of $3 million should be accrued for the bonus to be paid in cash to the employees of Ribby. The management
should also recognise an expense of (2/3 x 90% x $3 million) $1.8 million, with a corresponding increase in equity. The
terms of the share options have not been fixed and, therefore, the grant date becomes 30 November 2008 as this is
the date that the terms and conditions will be fixed. However, IFRS2 requires the entity to recognise the services when
received and, therefore, adjustment is required to the financial statements. Once the terms are fixed, the fair value can
be calculated and any adjustments made.
$m
DR Expense – in retained earnings 4·8
CR Equity 1·8
CR Current liabilities 3