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Esop guidance note

This query is : Resolved 

The Holding company has given to the subsidiary company employees, an option to subscribe to it's shares by way of either:-

a) Outright Purchase
b) Cash Settlement of differences in prices.

The employees are also liable to pay an option premium for the same.

How do we account for this in the subsidiary company's books(Ind Co), as this instance hasn't been covered by the Guidance note issued by the institute.

Barring the premium collection entries, should this be accounted having the Guidance Note as base?

Thank you

a) outright purchase option to be accounted as per Equity Settled Scheme accounting principles.

b) Cash Settlement should be accounted as Cash Settled scheme and revalued at every balance sheet date.

However, the cash settlement is only a mechanism to facilitate the cash payment where the shares are issued by the company to a trust and trust sells the shares and gives net cash to employee, then this will still be considered as an equity settled scheme and accounted accordingly.

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