Document ID: chunk:federal_register_of_legislation:F2022C00493:reg:10:p1
Version: federal_register_of_legislation:F2022C00493
Segment Type: reg
Provision Reference: reg 10 (pt 1/4)
Character Range: 227865–231001

10                                                                                                                                                                                                                                                                                                                              2,000 exercised options × (CU115 – CU108)                                                14,000                   1,672,000

IG17 There are many different types of employee share and share option plans. The following example illustrates the application of AASB 2 to one particular type of plan—an employee share purchase plan. Typically, an employee share purchase plan provides employees with the opportunity to purchase the entity's shares at a discounted price. The terms and conditions under which employee share purchase plans operate differ from country to country. That is to say, not only are there many different types of employee share and share options plans, there are also many different types of employee share purchase plans. Therefore, the following example illustrates the application of AASB 2 to one specific employee share purchase plan.

IG Example 11
Employee share purchase plan
Background
An entity offers all its 1,000 employees the opportunity to participate in an employee share purchase plan. The employees have two weeks to decide whether to accept the offer. Under the terms of the plan, the employees are entitled to purchase a maximum of 100 shares each. The purchase price will be 20 per cent less than the market price of the entity's shares at the date the offer is accepted, and the purchase price must be paid immediately upon acceptance of the offer. All shares purchased must be held in trust for the employees, and cannot be sold for five years. The employee is not permitted to withdraw from the plan during that period. For example, if the employee ceases employment during the five-year period, the shares must nevertheless remain in the plan until the end of the five-year period. Any dividends paid during the five-year period will be held in trust for the employees until the end of the five-year period.
In total, 800 employees accept the offer and each employee purchases, on average, 80 shares, ie the employees purchase a total of 64,000 shares. The weighted-average market price of the shares at the purchase date is CU30 per share, and the weighted-average purchase price is CU24 per share.
Application of requirements
For transactions with employees, AASB 2 requires the transaction amount to be measured by reference to the fair value of the equity instruments granted (AASB 2, paragraph 11). To apply this requirement, it is necessary first to determine the type of equity instrument granted to the employees. Although the plan is described as an employee share purchase plan (ESPP), some ESPPs include option features and are therefore, in effect, share option plans. For example, an ESPP might include a 'look-back feature', whereby the employee is able to purchase shares at a discount, and choose whether the discount is applied to the entity's share price