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Entities that grant stock options, in many cases, decide to make modifications to the vesting terms for a variety of reasons, such as to maintain

Entities that grant stock options, in many cases, decide to make modifications to the vesting terms for a variety of reasons, such as to maintain high employee morale or reward outstanding employees. This is especially true when it is improbable that the vesting conditions will be met and the entity wants to provide compensation to an employee. Read the relevant BCs in SFAS No. 123(R), paragraphs B181 through B193. Question: Answer: 1. Why does US GAAP allow a reduction in the costs of a share-based award when there is a modification of terms? 2. Do you agree with this reasoning?

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