In a Share Based Payment Transaction Where the Entity Has

Multiple Choice

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

A) where a present obligation does not exist the entity has a choice of classification as an equity or cash settled share based payment transaction.
B) the entity has a present obligation to settle in cash where it has a past practice or stated policy of settling in cash
C) the entity must settle in equity unless there is no commercial substance to the transaction.
D) if an entity elects to settle in cash the settlement is accounted for as an expense.
THE FOLLOWING INFORMATION RELATES TO QUESTIONS 16-18
Viola Ltd has granted each of its 10 senior executives a choice between receiving a cash payment equivalent to 1000 shares or receiving 1200 share. The grant is conditional on the completion of three years service with the company. If the share alternative is chosen, the shares must be held for two years after vesting date. At grant date the company's share price is $25 per share. At the end of years 1, 2 and 3 the share price is $27, $28 and $30 respectively. The company does not expect to pay dividends in the next three years. After taking into account the effect of post-vesting transfer restrictions the company estimates the grant-date fair value of the share alternative is $24 per share.