On 1 July 20x3, Alpha Company introduced a share option plan. Under the plan, one million share options with an estimated fair value of $4.3 million was granted to selected employees. The options have a vesting period of two years from date of grant. The intrinsic values of the options at 30 June 20x4 and 30 June 20x5 were $1.9 million and $2.3 million respectively. On 1 July 20x5, all the options were exercised.

As this is the first time the entity has a share-based compensation plan, the directors are unsure of how to account for the share options and have sought your advice on the accounting treatment.

Required

Advise the directors on the treatment of the share options for the years ended 31 October 20x4 and 20x5 in accordance with IFRS 2.