1. How much compensation cost should OMS recognize in each year of the award’s service period?

According to FASB ASC 718-10- 30-2: we measure share based payment based on fair value.

Compensation cost per year

Jnauary 1, 2012 

Compensation cost of OMS= (FV  X  number of shares award) / service period 

     =(1000 x $15)/ 4 

     = $ 3,750

Janauary 1, 2013 

Compensation cost of OMS = ( 1000 X$15) / 4 

     = $3,750 

Janauary 1, 2014 

l Compensation cost of OMS =  (1000 X $10.50)/ 2 = $ 5,250 

Modified Option FV : $12 

Original  Option FV : $9 

Additional Compensation Cost: 3

Unrecognized  costs ( $12+$9) / 2 = $10.50

Also, the year  2015

Compensation cost of OMS = $ 5,250

Total compensation cost of OMS = $ 3750 + $ 3,750 + $5,250 + $ 5,250

     = $18,000

2. How would the accounting for these awards change if the modification to the terms (i.e., exercise price) of the award was made on January 1, 2017, after the awards have become fully vested? 

According to FASB ASC 718-20- 55-94+95, when there is a modification in vested share options, the modified share options are immediately vested and the additional compensation is recognized in the same period.

FV of Modified share option on Jan 1, 2017  12

Less: FV of original share option on Jan 1, 2017

Additional Compensation Cost     3

According to FASB ASC 718-20- 55-96 OMS should recognize $3,000 ($3 x 1,000 shares) on Jan 1, 2017

3. How would the December 31, 2013 accounting change if management determined that the performance condition was improbable of achievement on December 31, 2013? What would be the cumulative amount of compensation cost recognized? 

According to FASB ASC 718-10- 25-20, accruals of compensation cost with a performance condition should only be accrued of the performance is probable. In this case it should not be accrued because it was found to be improbable. 

2013 Compensation Cost: 0

2012 previous recognized compensation expense of $3,750 should be reversed.

Additional Paid in capital       $ 3,750 

                    Compensation cost      $3,750

4. How much compensation cost would management recognize in 2014 and 2015 if the December 31, 2014, modification resulted in the awards becoming probable of achievement? 

According to FASB ASC 718-20- 55-116, since it is going from improbable to probable, OMS must determine the incremental compensation. The new share options will vest. The original will not vest because it was improbable and cost is 0.

2014

New FV = 12

12 * 1000 shares * 0.75 = 9000

2015

New FV = 12

12 * 1000 shares * 0.25 = 3000

According to FASB ASC 718-20- 55-117, since OMS reached the new target of 9m but not the original of 12m, OMS will recognize cumulative compensation cost of 12000 ( 9000 + 3000 ).

4a. How would the accounting for this modification differ under IFRSs?

According to IFRS 2 Share-based Payment, if the fair value of the new instruments is less than the fair value of the old instruments, the original fair value is used to expense. 

OMS should recognize:

2014

15 * 1000 shares * 0.75 = 11250

2015

15 * 1000 shares * 0.25 = 3750

https://www.iasplus.com/en/standards/ifrs/ifrs2

5. If the awards continued to be improbable of achievement after modification, how much cumulative compensation cost would be recognized through December 31, 2015? 

According to FASB ASC 718-20- 55-118, when the awards continue to be improbable, in this case going from improbable to improbable, no incremental compensation cost is recognized. This is because there was no change in fair value or number of shares to vest. 

2014 Compensation Cost: 0

2015 Compensation Cost: 0

FASB ASC 718-20- 55-119: since sales target was not met, cumulative compensation cost is 0.