Problem
Katy Co. granted 2,000 stock options to certain sales employees on January 1, 2016. The option vest at the end of three years (cliff vesting) but are conditional upon selling 25,000 cases of cranberry juice over the three-year service period. The grant-date fair value of each option is $60. No forfeitures are expected to occur. The company is expensing the costs of options on a straight-line basis over the three-year period at $30,000 per year (2,000 options X $90 / 3 = $60,000).
On January 1, 2017, the company's management believes the original sales targets of 25,000 cases will not be met because only 8,000 cases were sold in 2016. Management modifies the sales target for the options to vest to 20,000 cases, which it believes is reasonably achievable. The fair value of each option at January1, 2017 is $100.
Required:
Determine the amount to be recognized as compensation expense in Year 2016, 2017, and 2018 under (1) IFRS and (2) U.S. GAAP. Prepare the necessary journal entries.