Exam 14: Share Based Payment

As per AASB 2 Share-based Payment, a/an share-based payment transaction is one in which the entity acquires goods or services by incurring liabilities to the supplier for amounts that are based on the value of the entity's shares or other equity instruments of the entity.

On 1 July 2021 Polly Ltd grants 300 options to each of its 100 employees conditional on the employee remaining in service over the next three years. The fair value of each option is estimated to be $12. Polly estimates that 15 employees will leave over the three year vesting period. By 30 June 2022 four employees have left and the entity estimates that a further ten employees will leave over the next two years. On 30 June 2022 Polly decided to reprice its share options, due to a fall in its share price over the last 12 months. The repriced share options will vest on 30 June 2024. At the date of repricing, Polly estimates that the fair value of each original option is $3 and the fair value of each repriced option is $5. During the year ended 30 June 2023 a further 6 employees leave and Polly estimates that another 3 employees will leave during the year ended 30 June 2024. During the year ended 30 June 2024 four employees left. The entry at 30 June 2023 to account for the share based payment transaction is:

In situations where an option-pricing model is required to be used to determine the fair value of equity instruments granted, the accounting standard, AASB 2 Share-based Payment:

On 1 July 2021, Denver Ltd granted 800 share options with an exercise price of $25 to the CFO, conditional on the CFO remaining in employment with the company until 30 June 2024. The exercise price will drop to $20 if Denver's earnings increase by an average of 10% per year over the three year period. On 1 July 2021 the estimated fair value of the share options with an exercise price of $25 is $15 per option, and if the exercise price is $20, the estimated fair value of the options is $18 per option. During the year ended 30 June 2022 Denver's earnings increased by 10% and they are expected to continue to increase at this rate over the next two years. During the year ended 30 June 2023 Denver's earnings increased by 8% and Denver management expected that the earnings target would be achieved. During the year ended 30 June 2024 Denver's earnings increased by 12%. When calculating the remuneration expense to be recognised for the year ended 30 June 2023 which of the following dollar values should be included in the calculation?