Purpose
The purpose of this memorandum is to determine the appropriate Canadian accounting treatment to be used by IG Real Estate Advisors (‘IGRI’) to account for various stock option transactions.
Issues
1. Determine if the exercising of stock options subsequent to year-end, requires an adjustment to the financial statements or whether note disclosure is appropriate and the respective transaction should be recorded in fiscal 2008.
2. Determine how to account for the accelerated vesting of options as a result of a termination clause in an employee’s contract upon their dismissal.
3. Determine how to account for options that have yet to be granted.
Relevant Guidance
CICA Handbook Section 3820 – Subsequent Events
CICA Handbook Section 3870 – Stock-based Compensation and other Stock-based Payments
Analysis
1. Accounting Treatment of Options being exercised Subsequent to year-end
Based on section 3820 of the Handbook, financial statements should only be adjusted when events occurring between the date of the financial statements and the date of their completion provide additional evidence relating to conditions that existed at the date of the financial statements . Adjustment of the financial statements is not necessary and note disclosure is adequate when events occurring between the financial statements and their completion did not exist at year-end but rather:
a) cause significant changes to assets or liabilities in the subsequent period; or
b) will, or may, have a significant effect on the future operations of the enterprise
The section goes on to state that the issue of capital stock would not be considered an event that would warrant financial statement adjust ...