On 31 December 20X0, the Chief Executive of BC, a listed company, was awarded the option to purchase 1,000,000 shares in the company at £4.50 a share on 30 June 20X4. This option was subject to her achieving specified performance targets for the three years ending on 31 December 20X3. The following information has been provided:

(a) Calculate the charge for the share option to be included in the financial statements for the years ended 31 December 20X0, 20X1, 20X2, 20X3 and 20X4 using the IAS 37 method;

(b) Calculate the total cost of the share option using:
(i) the IAS 37 method;
(ii) the US FAS 123 and the IFRS 2 methods;
(iii) the UK recommendation.

(c) Discuss the different answers you have calculated in part (b).

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Date Option price Probability of achieving option 31.12.X0 5p 60% 31.12.XI 10p 70% 31.12.X2 15p 85% 31.12.X3 30p 100% 30.06.X4 35p 100%