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An entity granted share options with VESTING period 3 years. After Year 2, the EMPLOYEE LEAVES. Cumulative expense recognised by end of Y2 was ₹X. Identify the action.
ADefer reversal until grant date
BREVERSE the entire cumulative expense ₹X (the service condition has failed)
CContinue recognising expense for Y3 (X+Y3 charge)
DNo reversal — keep expense as is
Answer & Solution
Correct answer: B. REVERSE the entire cumulative expense ₹X (the service condition has failed)
Service condition failure: cumulative expense is reversed to zero. The 'true-up to actual' principle applies. Contrast options that vest but the employee chooses not to exercise — there the expense is NOT reversed (the service was received, just the option not exercised).
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