BC222 An entity might modify the terms of or conditions under which the equity instruments were granted. For example, the entity might reduce the exercise price of share options granted to employees (ie reprice the options), which increases the fair value of those options. During the development of ED 2, the Board focused mainly on the repricing of share options.

BC223 The Board noted that the IASC/G4+1 Discussion Paper argued that if the entity reprices its share options it has, in effect, replaced the original share option with a more valuable share option. The entity presumably believes that it will receive an equivalent amount of benefit from doing so, because otherwise the directors would not be acting in the best interests of the entity or its shareholders. This suggests that the entity expects to receive additional or enhanced employee services equivalent in value to the incremental value of the repriced share options. The Discussion Paper therefore proposed that the incremental value given (ie the difference between the value of the original share option and the value of the repriced share option, as at the date of repricing) should be recognised as additional remuneration expense. Although the Discussion Paper discussed repricing in the context of vesting date measurement, SFAS 123, which applies a grant date measurement basis for employee share‑based payment, contains reasoning similar to that in the Discussion Paper.