Exam 14: Share-Based Payment

Salt Limited grants 1000 share options to each of its 100 employees. Each grant is conditional on the employee working for the company for the next two years. The fair value of each option is estimated to be $5.00 at grant date and $7.50 at vesting date. The amount to be recognised as an expense by Salt in year 2 is:

On 1 July 2013, Nelson Pty Ltd granted 250 options to each of its 50 employees. The options are conditional on the employees remaining with the company for the 3 year vesting period. The options have a fair value of $7.50 at vesting date. In addition, the shares will vest as follows: On 30 June 2014 if the company's earnings have increased by more than 12% On 30 June 2015 if the company's earnings have increased by more than 10% averaged across the 2 year period On 30 June 2016 if the company's earnings have increased by more than 8% averaged across the 3 year period At 30 June 2014 Nelson's earnings have increased by 11% and 3 employees have left. The company expects that earnings will continue to increase at a similar rate during the year to 30 June 2015 and that the shares will vest at that time. It also expects that a further 4 employees will leave during the year. The remuneration expense for the year ended 30 June 2014 for Nelson is:

Question 13 is an example of:

On 1 July 2013 Fantasy Ltd granted 200 options to each of its 100 employees. The share options will vest on 30 June 2015 if the employees remain employed with the company on that date. The share options have a life of four years. The exercise price is $5, which is also Fantasy's share price at the grant date. Fantasy is unable to reliably estimate the fair value of the share options at the grant date. Fantasy's share price and the number of options exercised are set out below. Share options may only be exercised at year end. The cumulative remuneration expense to be recognised by Fantasy as at 30 June 2015 is:

In a share based payment transaction where the entity has settlement choice:

Which of the following is NOT within the scope of AASB 2 Share-based Payment?

Pepper Limited grants 500 share options to each of its 30 employees. Each grant is conditional on the employee working for the company for the next three years. The fair value of each option is estimated to be $5.00 at grant date and $7.50 at vesting date. The amount to be recognised as an expense by Pepper in year 2 is:

Which of the following is within the scope of AASB 2 Share-based Payment?

On 1 July 2013, Leo Limited granted 250 options to each of its 50 employees. The options are conditional on the employees remaining with the company for the 2 year vesting period. The options have a fair value of $10 at vesting date. In addition, the shares will vest as follows: On 30 June 2014 if the company's earnings have increased by more than 15% On 30 June 2015 if the company's earnings have increased by more than 12% averaged across the 2 year period At 30 June 2014 Leo's earnings have increased by 12% and 3 employees have left. The company expects that earnings will continue to increase at a similar rate during the year to 30 June 2015 and that the shares will vest at that time. It also expects that a further 4 employees will leave during the year. The remuneration expense for the year ended 30 June 2014 for Leo is:

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

Reload features are accounted for as follows:

Which of the following statements in relation to disclosures required under AASB 2 Share-based Payment is NOT correct?

On 1 July 2014 Luca Ltd grants 200 options to each of its 75 employees conditional on the employee remaining in service over the next two years. The fair value of each option is estimated to be $7. Luca estimates that 8 employees will leave over the two year vesting period. By 30 June 2015 four employees have left and the entity estimates that a further five employees will leave over the next year. On 30 June 2015 Luca 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 2016. At the date of repricing Luca estimates that the fair value of each original option is $1.50 and the fair value of each repriced option is $3. During the year ended 30 June 2016 four employees left. The remuneration expense for the year ended 30 June 2015 is:

A share-based payment transaction 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 is classified in AASB 2 Share-based Payment as:

Which of the following statements in relation to modifications to the terms and conditions on which equity instruments were granted as part of an employee share scheme is correct?

On 1 July 2013 Pearl Pty Ltd granted 800 share options with an exercise price of $35 to the CFO, conditional on the CFO remaining in employment with the company until 30 June 2016. The fair value of Pearl's shares at that time were assessed to be $40. The exercise price will drop to $30 if Pearl's earnings increase by an average of 8% per year over the three year period. On 1 July 2013 the estimated fair value of the share options with an exercise price of $35 is $10 per option, and if the exercise price is $30, the estimated fair value of the options is $12 per option. During the year ended 30 June 2014 Pearl'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 2015 Pearl's earnings increased by 9% and Pearl management continued to expect that the earnings target would be achieved. During the year ended 30 June 2016 Pearl's earnings increased by only 2%. At 30 June 2016 the share price is $23. Assuming that the CFO decides NOT to exercise his options at 30 June 2016, the following entry would be recorded:

On 1 July 2013 Pepper Limited granted 500 share options to each of its 100 employees. Each grant is conditional on the employee working for the company for the next two years. The fair value of each option is estimated to be $3.00. Pepper estimates that 8% of its employees will leave during the two year period and therefore forfeit their rights to the share options. During the year ended 30 June 2014 five employees left. At this time the company revised its estimate of total employee departures over the full two-year period to 10%. During the year ended 30 June 2015 a further 4 employees left. The amount to be recognised as an expense by Pepper for the year ended 30 June 2014 is:

In relation to equity instruments granted by an entity where the entity makes modifications to the terms and conditions attaching to the grant:

On 1 July 2013 Pearl Pty Ltd granted 800 share options with an exercise price of $35 to the CFO, conditional on the CFO remaining in employment with the company until 30 June 2016. The fair value of Pearl's shares at that time were assessed to be $40. The exercise price will drop to $30 if Pearl's earnings increase by an average of 8% per year over the three year period. On 1 July 2013 the estimated fair value of the share options with an exercise price of $35 is $10 per option, and if the exercise price is $30, the estimated fair value of the options is $12 per option. During the year ended 30 June 2014 Pearl'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 2015 Pearl's earnings increased by 9% and Pearl management continued to expect that the earnings target would be achieved. During the year ended 30 June 2016 Pearl's earnings increased by only 2%. At 30 June 2016 the share price is $23. The remuneration expense to be recognised for the year ended 30 June 2014 is:

A share-based payment transaction in which the entity receives goods or services as consideration for equity instruments of the entity is classified in AASB 2 Share-based Payment as: