On 1 October 2019 Easy Plc, granted to each of its senior management team either 6,500 shares in Easy Plc or a cash equivalent equal to each of 6,000 shares. The right is conditional on the managers remaining in employment at Easy Plc until 30 September 2021.

Easy Plc reserves the right to choose whether to settle the scheme in cash or shares. However, in the past, Easy has always opted to settle similar schemes in cash. If the shares are issued, they must be held for two years to 30 September 2021 before being sold.

Easy's share price was $8.50 on the 1 October 2019 and $9.00 on 30 September 2020. It rose to $9.25 on 20 October 2020, the date the financial statements were authorised for issue. The fair value of the shares alternative was calculated at $8.10, $8.60 and $8.85 at the same dates respectively.

At 1 October 2019, there were 30 members of the senior management team. As at 1 October 2019, no members of the team were expected to leave during the vesting period. However, due to a buoyant job market, two managers left in September 2020 and as at 30 September 2020, a third manager was expected to leave within a few months of the year.

The new finance director is unsure how to account for the above scheme. He is also aware that because tax relief will be granted on exercise (based on the entity's share price at the date of exercise), there might be some deferred tax implications.

In your report, you are required to:

Discuss, with suitable computations, the accounting treatment for the above scheme in the financial statements of Easy for the year ended 30 September 2020, taking into account any deferred tax implications and the impact of the events occurring after the end of the reporting period

Assumed a tax rate of 30%

The finance director is worried about the company's projected cash flow over the next 12 months and is considering negotiating with the mangers to replace these rights with a new scheme that will vest in four years' time. This will probably include a reduced cash payment at the date when the original rights would have vested.

In your report, you are required to:

Discuss the accounting treatment that would be required if this change was made.