CASE STUDY VESTING CONDITIONS On 1 January 2017, Jarrod Ltd grants 2000 share options to its 10 sales staff. At this date the fair value of the share options is $50. The vesting conditions are: • the salesperson must remain with the company for a minimum of 3 years • the gross profit margin remains at a minimum of 40% over the next 3 years. At the end of year 1, Jarrod Ltd adjusts the target for gross profit margin from 40% to 50%. This target proves too difficult to maintain and by the end of year 3 the gross profit margin is at 42%. At 31 December 2019, there are six sales staff employed with Jarrod Ltd. Five of these sales staff have been with the entity for the past 3 years. The other salesperson commenced employment with the entity on 1 December 2019. The fair value of the share options at the end of the vesting period is $55. Required With regards to the requirements of AASB 2/IFRS 2, discuss the implications of a share option grant whereby the vesting conditions are modified and subsequently not satisfied. CASE STUDY