Question 1

Which of the following is not a main heading for AASB 2 disclosures?

Accepted Answer

A)  the nature and extent of share-based payment arrangements 
B)  how the fair value of goods or services received or equity instruments granted were determined 
C)  fair value of a similar equity instrument 
D)  effect from shared-based transactions on the profit or loss for the period 
A)  the nature and extent of share-based payment arrangements 
B)  how the fair value of goods or services received or equity instruments granted were determined 
C)  fair value of a similar equity instrument 
D)  effect from shared-based transactions on the profit or loss for the period C

Question 2

Discuss why equity-settled share-based payments may also be issued with market conditions.

Accepted Answer

Market conditions are those conditions upon which the exercise price,vesting or exercisability of an equity instrument depends and are related to the market price of the entity's equity instruments.These include attaining a specified share price or a specified amount of intrinsic value of a share option,or achieving a specified target that is based on the market price of the entity's equity instruments relative to an index of market prices of equity instruments of other entities.Examples of market and other than market conditions (non-market conditions)are detailed in Table 17.3 on page 609.
For more information refer to 'Vesting conditions not to influence fair value attributed to equity instruments'.

Question 3

AASB 2 requires the remeasurement of equity-settled transactions at fair value at reporting date.

Accepted Answer

A) True 
 B)False  False

Question 4

Southport Ltd grants 100 share appreciation rights (SARs)to each of its 50 employees on 1 July 2009.Each grant is conditional on the employee working for the company for the next 3 years.All SARs held by employees will vest at the end of 3 years.The intrinsic value (equals cash actually paid out)and estimates of the fair value of the SARs at the end of each year are as follows:
$$\begin{array} { | l | l | l | } 
\hline \text { Year ending } & \text { Fair value } & \text { Intrinsic value } \
\hline 30 \text { June } 2010 & \$ 7.20 & \
\hline 30 \text { June } 2011 & \$ 7.75 & \
\hline 30 \text { June } 2012 & \$ 9.10 & \$ 7.50 \
\hline 30 \text { June } 2013 & \$ 10.70 & \$ 10.00 \
\hline 30 \text { June } 2014 & & \$ 12.50 \
\hline
\end{array}$$ 
Summary of actual and estimated employee departures and number of options exercised follow:
$$\begin{array} { | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Year ending } \
30 \text { June }
\end{array} & \text { Actual departures } & \begin{array} { l } 
\text { Revised estimates of departures } \
\text { before the option vests }
\end{array} & \begin{array} { l } 
\text { Number of employees that exercised } \
\text { the option }
\end{array} \
\hline 2010 & 3 & \text { Further } 6 & \
\hline 2011 & 4 & \text { Further } 3 & \
\hline 2012 & 2 & \text { NA } & 15 \
\hline 2013 & - & - & 14 \
\hline 2014 & - & - & 12 \
\hline
\end{array}$$
In accordance with AASB 2,how much employee benefits expense related to the share option issue should Southport Ltd recognise for the year ended 30 June 2010?

Accepted Answer

A)  $9840 
B)  $12 000 
C)  $29 520 
D)  $36 000 
A)  $9840 
B)  $12 000 
C)  $29 520 
D)  $36 000

Question 5

AASB 2 has reduced the discretion that reporting entities have when accounting for options and other share-based payments.

Accepted Answer

A) True 
 B)False

Question 6

Why are equity instruments in a share-based payment transactions modified?
 What is the accounting treatment for such modifications that is consistent with AASB 2?

Accepted Answer

Equity instruments can be modified or ca

Question 7

If share appreciation rights vest immediately,the entity shall presume that the services rendered by the employees in exchange for the share appreciation rights have been received.

Accepted Answer

A) True 
 B)False

Question 8

On 1 July 2012 Lancashire Ltd grants 100 share options to each of its 50 employees conditional upon the employee working for the entity for the next 3 years.On the same date,the entity estimates the fair value of each share option at $15.Based on probability estimates,15 employees are expected to leave the entity in one year and another 5 employees in two years.Actual resignation for the year ending 2013 was 12 employees and the fair value of the option is $12 on 30 June 2014. In accordance with AASB 2,what is the cumulative remuneration expense (related to the share option issue)as at 30 June 2011?

Accepted Answer

A)  $24 000 
B)  $26 400 
C)  $33 000 
D)  $45 000 
A)  $24 000 
B)  $26 400 
C)  $33 000 
D)  $45 000

Question 9

Discuss the hierarchy to follow in determining which fair values to use in a share-based payment transaction that is consistent with AASB 2.

Accepted Answer

In determining which fair values to use

Question 10

In a cash-settled share-based payment transaction,the entity shall remeasure the fair value of the liability at each reporting date and at the date of settlement,with any changes in fair value recognised in profit or loss for the period.

Accepted Answer

A) True 
 B)False

Question 11

In a share-based payment transaction like an option,vesting date is:

Accepted Answer

A)  grant date. 
B)  expiry date of option. 
C)  date when all vesting conditions are satisfied. 
D)  balance date. 
A)  grant date. 
B)  expiry date of option. 
C)  date when all vesting conditions are satisfied. 
D)  balance date.

Question 12

Which of the following is an acceptable measure of fair value of the equity instruments granted?

Accepted Answer

A)  cost of the equity instrument at initial recognition 
B)  valuation technique used to estimate what the price of the equity instruments would have been on the measurement date in an arm's length transaction between knowledgeable, willing parties. 
C)  fair value of a similar equity instrument 
D)  net realisable value of the equity instrument 
A)  cost of the equity instrument at initial recognition 
B)  valuation technique used to estimate what the price of the equity instruments would have been on the measurement date in an arm's length transaction between knowledgeable, willing parties. 
C)  fair value of a similar equity instrument 
D)  net realisable value of the equity instrument

Question 13

Which of the following items are considered share-based payment transactions within the scope of AASB 2?

Accepted Answer

A)  share dividends to employees who are shareholders of the entity 
B)  goods acquired from a supplier on credit to be settled in cash 
C)  services provided by an employee to be settled in equity instruments 
D)  purchase of non-current assets on credit to be settled in cash 
A)  share dividends to employees who are shareholders of the entity 
B)  goods acquired from a supplier on credit to be settled in cash 
C)  services provided by an employee to be settled in equity instruments 
D)  purchase of non-current assets on credit to be settled in cash

Question 14

AASB 2 also applies to transactions where an entity issues equity instruments to purchase the net assets of another entity in a business combination.

Accepted Answer

A) True 
 B)False

Question 15

AASB 2 requires entities to disclose information relating to:

Accepted Answer

A)  measurement details of options. 
B)  details of share-based payment arrangements that were modified during the period. 
C)  measurement details of other equity instruments (excluding options). 
D)  all of the given answers. 
A)  measurement details of options. 
B)  details of share-based payment arrangements that were modified during the period. 
C)  measurement details of other equity instruments (excluding options). 
D)  all of the given answers.

Question 16

Which of the following items are considered cash-settled share-based payment transactions within the scope of AASB 2?

Accepted Answer

A)  An entity grants 200 share options to all employees. 
B)  An entity grants 200 share options to all employees but requires employees to work at least 3 years. 
C)  An entity acquires a piece of equipment from another entity in exchange for shares of the entity. 
D)  An entity issues share appreciation rights to its employees. 
A)  An entity grants 200 share options to all employees. 
B)  An entity grants 200 share options to all employees but requires employees to work at least 3 years. 
C)  An entity acquires a piece of equipment from another entity in exchange for shares of the entity. 
D)  An entity issues share appreciation rights to its employees.

Question 17

Southport Ltd grants 100 share appreciation rights (SARs)to each of its 50 employees on 1 July 2009.Each grant is conditional on the employee working for the company for the next 3 years.All SARs held by employees will vest at the end of 3 years.The intrinsic value (equals cash actually paid out)and estimates of the fair value of the SARs at the end of each year are as follows:
$$\begin{array} { | l | l | l | } 
\hline \text { Year ending } & \text { Fair value } & \text { Intrinsic value } \
\hline 30 \text { June } 2010 & \$ 7.20 & \
\hline 30 \text { June } 2011 & \$ 7.75 & \
\hline 30 \text { June } 2012 & \$ 9.10 & \$ 7.50 \
\hline 30 \text { June } 2013 & \$ 10.70 & \$ 10.00 \
\hline 30 \text { June } 2014 & & \$ 12.50 \
\hline
\end{array}$$ 
Summary of actual and estimated employee departures and number of options exercised follow:
$$\begin{array} { | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Year ending } \
30 \text { June }
\end{array} & \text { Actual departures } & \begin{array} { l } 
\text { Revised estimates of departures } \
\text { before the option vests }
\end{array} & \begin{array} { l } 
\text { Number of employees that exercised } \
\text { the option }
\end{array} \
\hline 2010 & 3 & \text { Further } 6 & \
\hline 2011 & 4 & \text { Further } 3 & \
\hline 2012 & 2 & \text { NA } & 15 \
\hline 2013 & - & - & 14 \
\hline 2014 & - & - & 12 \
\hline
\end{array}$$
What is/are the journal entry/ies to recognise salary expense for Southport Ltd related to the share appreciation rights issued 1 July 2009 for the year ended 30 June 2012?

Accepted Answer

A) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 16643 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 16643 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 37310 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 37310 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 2993 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 2993 \
\hline & & & \
\hline \mathrm { Dr } & \text { Employee benefits expense } & 11250 & \
\hline \mathrm { Cr } & \text { Cash } & & 11250 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 2993 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & &2993  \
\hline & & & \
\hline \mathrm { Dr } & \text { Employee benefits expense } & 11250 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 11250 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 16643 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 16643 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 37310 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 37310 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 2993 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 2993 \
\hline & & & \
\hline \mathrm { Dr } & \text { Employee benefits expense } & 11250 & \
\hline \mathrm { Cr } & \text { Cash } & & 11250 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 2993 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & &2993  \
\hline & & & \
\hline \mathrm { Dr } & \text { Employee benefits expense } & 11250 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 11250 \
\hline
\end{array}$$

Question 18

Liverpool limited grants 100 options to each of its 50 employees on 1 July 2009.Each grant is conditional on the employee working for the company for the next 3 years.The fair value of each option at grant date is $15.Liverpool Ltd estimates that 15% of its employees will leave during the vesting period.The following table summarises the actual employee departures and revised estimates of employee departures across the vesting period. 
$$\begin{array} { | l | l | l | } 
\hline \text { Year ending } 30 \text { June } & \text { Actual departures } & \begin{array} { l } 
\text { Revised estimate of departures } \
\text { before the option vests }
\end{array} \
\hline 2010 & 4 & \text { Further } 7 \
\hline 2011 & 4 & \text { Further } 4 \
\hline 2012 & 3 & \text { NA } \
\hline
\end{array}$$
By the end of year 2011 the company's share price had fallen and it decides to re-price the options.At this time the fair value of the original options is estimated to be $5 and the fair value of the re-priced options is estimated to be $8.
What is the employee benefits expense of Liverpool Ltd related to this share option for the year ended 30 June 2012?

Accepted Answer

A)  $19 500 
B)  $22 750 
C)  $26 500 
D)  $70 200 
A)  $19 500 
B)  $22 750 
C)  $26 500 
D)  $70 200

Question 19

On 1 July 2009,Windermere Ltd grants 200 share options to each of its 100 employees.The share option is conditional upon the employee working for the entity when the share option vests and the entity achieving the following non-market vesting conditions:
$$\begin{array} { | l | l | } 
\hline \text { Year ending } 30 \text { June } & { \text { Condition } } \
\hline 2010 & \text { If earnings have increased by } > 18 \% \
\hline 2011 & \begin{array} { l } 
\text { If earnings have increased by } > 13 \% \text { averaged across } \
\text { the 2 year period }
\end{array} \
\hline 2012 & \begin{array} { l } 
\text { If earnings have increased by at least } 10 \% \text { averaged } \
\text { across the 3 year period }
\end{array} \
\hline
\end{array}$$ 
If the employee resigns before the share option vests,the share option is forfeited.
 
On 30 June 2012,based on probability estimates how many employees are expected to be employed by Windermere Ltd when the share vests?

Accepted Answer

A)  78 
B)  82 
C)  88 
D)  90 
A)  78 
B)  82 
C)  88 
D)  90

Question 20

When options are issued,the amount that must be paid to acquire the shares is referred to as:

Accepted Answer

A)  the current share price. 
B)  the strike price. 
C)  the fair value of the share price. 
D)  net realisable value of the share price. 
A)  the current share price. 
B)  the strike price. 
C)  the fair value of the share price. 
D)  net realisable value of the share price.

Exam 17: Accounting for Share-Based Payments

Which of the following is not a main heading for AASB 2 disclosures?

Discuss why equity-settled share-based payments may also be issued with market conditions.

AASB 2 requires the remeasurement of equity-settled transactions at fair value at reporting date.

AASB 2 has reduced the discretion that reporting entities have when accounting for options and other share-based payments.

Why are equity instruments in a share-based payment transactions modified? What is the accounting treatment for such modifications that is consistent with AASB 2?

If share appreciation rights vest immediately,the entity shall presume that the services rendered by the employees in exchange for the share appreciation rights have been received.

Discuss the hierarchy to follow in determining which fair values to use in a share-based payment transaction that is consistent with AASB 2.

In a cash-settled share-based payment transaction,the entity shall remeasure the fair value of the liability at each reporting date and at the date of settlement,with any changes in fair value recognised in profit or loss for the period.

In a share-based payment transaction like an option,vesting date is:

Which of the following is an acceptable measure of fair value of the equity instruments granted?

Which of the following items are considered share-based payment transactions within the scope of AASB 2?

AASB 2 also applies to transactions where an entity issues equity instruments to purchase the net assets of another entity in a business combination.

AASB 2 requires entities to disclose information relating to:

Which of the following items are considered cash-settled share-based payment transactions within the scope of AASB 2?

When options are issued,the amount that must be paid to acquire the shares is referred to as:

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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