An award vesting 25% a year over four years is four awards, not one. Each tranche has its own vesting period and, because expected life differs, its own fair value per unit. That observation is where the two rulebooks split.
IFRS 2 and Ind AS 102 require each tranche to be treated as a separate grant and expensed over its own vesting period. Tranche one is expensed entirely in year one, tranche two over two years, tranche four over four. The result front-loads heavily.
Straight-line vs graded vesting, with an example
ASC 718 requires the same accelerated attribution for awards carrying performance conditions. For awards whose only condition is service it permits a policy election of straight-line attribution over the total requisite service period, subject to a floor. Cumulative expense recognised at any date must be at least the grant-date fair value of the portion that has vested. Most American filers elect straight-line.
Vellore Analytics grants 4,00,000 options in four equal tranches with per-unit fair values of ₹142, ₹168, ₹189 and ₹206, a total grant-date value of ₹7,05,00,000. The two attributions:
| Year | Ind AS 102 accelerated | US straight-line election | Vested portion, for the floor test |
|---|---|---|---|
| 1 | ₹3,40,50,000 | ₹1,76,25,000 | ₹1,42,00,000 |
| 2 | ₹1,98,50,000 | ₹1,76,25,000 | ₹3,10,00,000 |
| 3 | ₹1,14,50,000 | ₹1,76,25,000 | ₹4,99,00,000 |
| 4 | ₹51,50,000 | ₹1,76,25,000 | ₹7,05,00,000 |
| Total | ₹7,05,00,000 | ₹7,05,00,000 |
Year one differs by ₹1,64,25,000, which is 93.1915% more under the Indian rulebook, on identical awards. By year four the American filer reports more than three times what the Indian filer reports. The floor never binds here, because cumulative straight-line expense stays above the vested portion at every year end, but you still have to run it. It binds whenever the early tranches carry disproportionate value.
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How do forfeitures change the expense?
Forfeitures are the second fork. IFRS 2 requires an estimate of how many awards will vest and a true-up each period to the current best estimate, with a final true-up to actual. ASC 718, since 2016, permits an accounting policy election to estimate forfeitures or to recognise them as they occur. A filer electing to recognise as they occur reports a higher expense early and a credit when people leave.
The true-up mechanics are the same under both: recompute the cumulative expense the award should have carried by the reporting date on current estimates, compare it with what has been recognised, and book the difference. When two of Vellore's teams leave at the end of year two, taking 12,000 units of tranche three and 15,000 of tranche four, the revised total falls to ₹6,51,42,000 and the year-two Indian charge drops to ₹1,67,93,000, which is ₹30,57,000 below the no-forfeiture path. You won't find the credit on a line of its own. It's embedded in a smaller charge, and only the roll-forward reveals it.
Why does the attribution choice distort comparisons?
One caution about comparing these two filers, because it's the point of the whole section. In year one the Indian company's share-based expense is 1.8306% of revenue against the American company's 0.9476%, a gap of 0.8831 percentage points of margin. Neither is being generous or stingy. They granted the same thing.