(a) It has become increasingly common for entities to use share-based payment methods and the most common example is to grant employees share options as part of a remuneration package. These options often vest at the end of a specified period, and are subject to vesting conditions. IFRS 2 – Share-based Payment – has been issued to provide financial reporting guidance for entities which engage in this type of transaction.

Required:
(i) Explain how share options granted to employees with a future vesting date and subject to vesting conditions should be recognised and measured in the financial statements of the employing entity. Your explanation need only include the treatment of non-market based vesting conditions. (6 marks)

(ii) Explain what would be the changes to your answer if instead the entity granted share appreciation rights which are payable in cash to the employees at the end of the vesting period. (3 marks)