Question 1

AASB 2 does not require expensing of cash-settled share-based payment transactions until settlement date.

Accepted Answer

A) True 
 B)False

Question 2

Winton Ltd 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 3 years.The fair value of each option at grant date is $15. The following information is available:
$$\begin{array} { | l | l | l | } 
\hline \text { Year ending 30 June } & \begin{array} { l } 
\text { Estimate of departures before the } \
\text { option vests }
\end{array} & \begin{array} { l } 
\text { Fair value of option at end of } \
\text { period }
\end{array} \
\hline 2010 & 10 & \$ 14 \
\hline 2011 & 12 & \$ 18 \
\hline 2012 & 14 \text { (actual) } & \$ 20 \
\hline
\end{array}$$
What is the employee benefits expense of Winton Ltd related to this share option for the year ended 30 June 2010,2011 and 2012 respectively?

Accepted Answer

A)  $18 667; 26 933; 26 400 
B)  $20 000; 20 000; 20 000 
C)  $20 000, $18 000; $16,000 
D)  $26 667; $24 000; $21 333 
A)  $18 667; 26 933; 26 400 
B)  $20 000; 20 000; 20 000 
C)  $20 000, $18 000; $16,000 
D)  $26 667; $24 000; $21 333

Question 3

AASB 2 requires that goods and services received in an equity-settled share-based transaction be measured in reference to fair value of equity instruments granted.

Accepted Answer

A) True 
 B)False

Question 4

Blackburn Ltd grants 50 share options to each of its 150 employees on 1 July 2009.Each grant is conditional upon the employee working for the company for 3 years following the grant date.On grant date,the fair value of each option is estimated to be $12. Estimated value of the option for the year ending 2010,2011 and 2012 is $10,$13,$14 respectively.
Information on employee departures at the end of each year follows:
$$\begin{array} { | l | l | l | } 
\hline \text { Year ending 30 June } & \text { Actual departures } & \begin{array} { l } 
\text { Revised estimate of departures } \
\text { before option vests }
\end{array} \
\hline 2010 & 7 & 22 \% \
\hline 2011 & 6 & 18 \% \
\hline 2012 & 4 & \text { NA } \
\hline
\end{array}$$
What would be the appropriate journal entry to account for the share-based payment transaction for the year ending 30 June 2011?

Accepted Answer

A) 
$$\begin{array} { | l | l | r | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 25800 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 25800 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | r | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 26200 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 26200 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 29900 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 29900 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 33800 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 33800 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | l | l | r | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 25800 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 25800 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | r | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 26200 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 26200 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 29900 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 29900 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 33800 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 33800 \
\hline
\end{array}$$

Question 5

If an entity alters the conditions of the options after issue,AASB 2 requires the effects of such modifications to be recognised.

Accepted Answer

A) True 
 B)False

Question 6

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 2013?

Accepted Answer

A) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 10820 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 10820 \
\hline & & & \
\hline \mathrm { Dr } & \text { Employee benefits expense } & 14000 & \
\hline \mathrm { Cr } & \text { Cash } & & 14000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 12436 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 12436 \
\hline & & & \
\hline \mathrm { Dr } & \text { Employee benefits expense } & 14000 & \
\hline \mathrm { Cr } & \text { Cash } & & 14000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 3180 & \
\hline \mathrm { Dr } & \text { Accrued salaries expense } & 10820 & \
\hline \mathrm { Cr } & \text { Cash } & & 14000 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 14820 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 10820 \
\hline \mathrm { Cr } & \text { Cash } & & 14000 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 10820 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 10820 \
\hline & & & \
\hline \mathrm { Dr } & \text { Employee benefits expense } & 14000 & \
\hline \mathrm { Cr } & \text { Cash } & & 14000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 12436 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 12436 \
\hline & & & \
\hline \mathrm { Dr } & \text { Employee benefits expense } & 14000 & \
\hline \mathrm { Cr } & \text { Cash } & & 14000 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 3180 & \
\hline \mathrm { Dr } & \text { Accrued salaries expense } & 10820 & \
\hline \mathrm { Cr } & \text { Cash } & & 14000 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 14820 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 10820 \
\hline \mathrm { Cr } & \text { Cash } & & 14000 \
\hline
\end{array}$$

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 2011,based on probability estimates how many employees are expected to be employed by Windermere Ltd when the share option vests?

Accepted Answer

A)  72 
B)  75 
C)  78 
D)  82 
A)  72 
B)  75 
C)  78 
D)  82

Question 9

Discuss the accounting treatment required in AASB 2 with respect to share-based payment transactions with cash alternatives.

Accepted Answer

AASB 2 outlines the accounting treatment

Question 10

Wigan Ltd grants 100 options to each of its 80 employees on 1 July 2009.The fair value of each option at grant date is $20.The vesting conditions allow shares to vest if the following performance targets are achieved:
$$\begin{array} { | l | l | } 
\hline \text { Year ending } 30 \text { June } & { \text { Condition } } \
\hline 2010 & \text { If earnings have increased by } > 18 \% \
\hline 2011 & \begin{array} { l } 
\text { If earnings have increased by } > 13 \% \text { averaged across } \
\text { the 2 year period }
\end{array} \
\hline 2012 & \begin{array} { l } 
\text { If earnings have increased by at least } 10 \% \text { averaged } \
\text { across the 3 year period }
\end{array} \
\hline
\end{array}$$ 
The following information is available:
 
In accordance with AASB 2,how much employee benefits expense related to the share option issue should Wigan Ltd recognise for the year ended 30 June 2011?

Accepted Answer

A)  $22 000 
B)  $23 333 
C)  $76 000 
D)  $97 333 
A)  $22 000 
B)  $23 333 
C)  $76 000 
D)  $97 333

Question 11

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

Accepted Answer

A)  Company A grants 5000 options each to its directors in return for services to be received over two years. 
B)  Company B purchases machinery in exchange for shares. 
C)  Company C incurs a liability based on the price of the entity's share options to pay for the services of its sales executives. 
D)  Company A grants 5000 options each to its directors in return for services to be received over two years; Company B purchases machinery in exchange for shares. 
A)  Company A grants 5000 options each to its directors in return for services to be received over two years. 
B)  Company B purchases machinery in exchange for shares. 
C)  Company C incurs a liability based on the price of the entity's share options to pay for the services of its sales executives. 
D)  Company A grants 5000 options each to its directors in return for services to be received over two years; Company B purchases machinery in exchange for shares.

Question 12

A share-based payment is a transaction that entitles another party to receive a cash payment with the amount paid dependent on the price of the entity's shares or other equity instruments.

Accepted Answer

A) True 
 B)False

Question 13

Mission Beach Ltd 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 3 years.The fair value of each option at grant date is $15. The following information is available:
$$\begin{array} { | l | l | l | } 
\hline \text { Year ending 30 June } & \begin{array} { l } 
\text { Estimate of departures before the } \
\text { option vests }
\end{array} & \begin{array} { l } 
\text { Fair value of option at end of } \
\text { period }
\end{array} \
\hline 2010 & 10 & \$ 14 \
\hline 2011 & 12 & \$ 18 \
\hline 2012 & 14 \text { (actual) } & \$ 20 \
\hline
\end{array}$$
What is the employee benefits expense of Mission Beach Ltd related to this share option for the year ended 30 June 2011?

Accepted Answer

A)  $18 000 
B)  $20 000 
C)  $24 000 
D)  $26 933 
A)  $18 000 
B)  $20 000 
C)  $24 000 
D)  $26 933

Question 14

Blackburn Ltd grants 50 share options to each of its 150 employees on 1 July 2009.Each grant is conditional upon the employee working for the company for 3 years following the grant date.On grant date,the fair value of each option is estimated to be $12. Estimated value of the option for the year ending 2010,2011 and 2012 is $10,$13,$14 respectively.
Information on employee departures at the end of each year follows:
$$\begin{array} { | l | l | l | } 
\hline \text { Year ending 30 June } & \text { Actual departures } & \begin{array} { l } 
\text { Revised estimate of departures } \
\text { before option vests }
\end{array} \
\hline 2010 & 7 & 22 \% \
\hline 2011 & 6 & 18 \% \
\hline 2012 & 4 & \text { NA } \
\hline
\end{array}$$
What would be the appropriate journal entry to account for the share-based payment transaction for the year ending 30 June 2010?

Accepted Answer

A) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 19500 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 19500 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 23400 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 23400 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 23833 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 23833 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 28600 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 28600 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 19500 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 19500 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 23400 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 23400 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 23833 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 23833 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 28600 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 28600 \
\hline
\end{array}$$

Question 15

Equity instruments granted to employees of the acquiree,in their capacity as employees in a business combination,is within the scope of AASB 2.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is incorrect of cash-settled share-based payment transactions?

Accepted Answer

A)  The entity acquires goods and services by incurring a liability to transfer cash or other assets that are based on the price or value of the entity's shares or other equity instruments of the entity. 
B)  Share appreciation rights (SARs) is one example of a cash-settled share-based payment transaction. 
C)  Cash-settled share-based payment transactions are required to be re-measured at fair value at each reporting date until settlement date. 
D)  The equity shall be measured, initially and at each reporting date until settled, at the fair value of the share appreciation rights, by applying an option pricing model, taking into account the terms and conditions on which the share appreciation rights were granted, and the extent to which the employees have rendered service to date. 
A)  The entity acquires goods and services by incurring a liability to transfer cash or other assets that are based on the price or value of the entity's shares or other equity instruments of the entity. 
B)  Share appreciation rights (SARs) is one example of a cash-settled share-based payment transaction. 
C)  Cash-settled share-based payment transactions are required to be re-measured at fair value at each reporting date until settlement date. 
D)  The equity shall be measured, initially and at each reporting date until settled, at the fair value of the share appreciation rights, by applying an option pricing model, taking into account the terms and conditions on which the share appreciation rights were granted, and the extent to which the employees have rendered service to date.

Question 17

Which of the following items are not considered share-based payment transactions within the scope of AASB 2?

Accepted Answer

A)  options issued to employees in exchange for services rendered 
B)  shares issued to employees for services rendered 
C)  shares issued to consultants for services rendered 
D)  bonus shares issued to employees as a shareholder of the entity 
A)  options issued to employees in exchange for services rendered 
B)  shares issued to employees for services rendered 
C)  shares issued to consultants for services rendered 
D)  bonus shares issued to employees as a shareholder of the entity

Question 18

Discuss the recognition principles required in AASB 2 when an entity issues a share-based transaction instrument that has vesting conditions?

Accepted Answer

AASB 2 requires entities to recognize sh

Question 19

In share-based payment transactions with cash alternatives,the entity shall measure the equity component of the compound financial instrument as the difference between the fair value of the goods or services received and the fair value of the debt component,measured at vesting date.

Accepted Answer

A) True 
 B)False

Question 20

Explain why senior managers or executives have share options as part of their remuneration.

Accepted Answer

AASB 2 defines a share option as: a cont

Exam 17: Accounting for Share-Based Payments

AASB 2 does not require expensing of cash-settled share-based payment transactions until settlement date.

AASB 2 requires that goods and services received in an equity-settled share-based transaction be measured in reference to fair value of equity instruments granted.

If an entity alters the conditions of the options after issue,AASB 2 requires the effects of such modifications to be recognised.

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

Discuss the accounting treatment required in AASB 2 with respect to share-based payment transactions with cash alternatives.

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

A share-based payment is a transaction that entitles another party to receive a cash payment with the amount paid dependent on the price of the entity's shares or other equity instruments.

Equity instruments granted to employees of the acquiree,in their capacity as employees in a business combination,is within the scope of AASB 2.

Which of the following statements is incorrect of cash-settled share-based payment transactions?

Which of the following items are not considered share-based payment transactions within the scope of AASB 2?

Discuss the recognition principles required in AASB 2 when an entity issues a share-based transaction instrument that has vesting conditions?

In share-based payment transactions with cash alternatives,the entity shall measure the equity component of the compound financial instrument as the difference between the fair value of the goods or services received and the fair value of the debt component,measured at vesting date.

Explain why senior managers or executives have share options as part of their remuneration.

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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