January 2015, Gigabyte Inc. granted 10,000 "at the money" employee stock options (i.E the exercise price was equal to the stock price on the grant date.) to align the compensation of the employees with the financial performance of the company, the award will vest only if cumulative revenue over the following three year reporting period is greater than $100 million and if they are still employed. as of the date of the grant, management believes it is probable that the company will achieve cumulative revenue in excess of 100 million over the next three year period.

Each award has a grand - date fair value of $15. Gigabyte's valuation professionals have indicated that if the revenue target was factored in to the fair value assessment, the grant date fair value would be $12

Gigabyte adopted ASC 718. Revenue in each of the next three years was as follows:

2015: $30 million.

2016: 20 million

2017: 40 million

Required:

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3. In the end of Year 2 (2016), due to poor earnings, the stock price of Gigabyte has fallen significantly. Management determined that the performance condition of cumulative revenue in excess of $100 million over the three-year period was improbable of achievement. Management decided to modify the terms of the options by decreasing the exercise price on the stock options to $10 and lower the vesting performance condition of cumulative revenue in excess of $100 million to $80 million over the three-year period. These downward adjustments were made in order to ensure that the options continue to provide intended motivational benefit to employees. Immediately prior to the modification of the terms, the fair value was $1 per option. After considering the impact of the modification, the fair value was $7 per option. As a result of the modification, what would be the compensation expense for 2016 and 2017? Citation from ASC is required to support your conclusion