BC359 A respondent to the ED noted that the final sentence of the definition of vesting conditions, which states that “a performance condition might include a market condition”, is contradictory. This is because a market condition:

(a) is a target that is related to the market price of the entity’s equity instruments; and

(b) includes no explicit requirement for the counterparty to complete a specified period of service.

BC360 The Board observed that, on the basis of the definition of performance condition, a performance target that is related to the market price of an entity’s equity instruments and to the completion of a specified period of service is considered a market (performance) condition. Consequently, the Board disagreed that an inconsistency existed in the definitions of performance condition and market condition. To avoid confusion in the definitions of performance condition and market condition, the Board decided to:

(a) delete the last sentence in the definition of vesting condition (ie “a performance condition might include a market condition”); and

(b) indicate within the definition of performance condition that performance conditions are either market conditions or non-market conditions.