Liverpool 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 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 2010?

A) $19 500 B) $25 000 C) $58 500 D) $75 000 A) $19 500 B) $25 000 C) $58 500 D) $75 000

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: \[\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Year ending } \\ 30 \text { June } \end{array} & \text { Actual departures } & \begin{array} { l } \text { Revised estimates of departures } \\ \text { before the option vests } \end{array} & \text { Number of employees that exercised } \\ \hline 2010 & 3 & \text { Further } 6 & \\ \hline 2011 & 4 & \text { Further } 3 & \\ \hline 2012 & 2 & \text { NA } & 15 \\ \hline 2013 & - & - & 14 \\ \hline 2014 & - & - & 12 \\ \hline \end{array}\] What is the journal entry to recognise salary expense for Southport Ltd related to the share appreciation rights issued 1 July 2009 for the year ended 30 June 2014?

A) \[\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 15000 & \\ \hline \mathrm { Cr } & \text { Cash } & & 15000 \\ \hline \end{array}\] B) \[\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 15000 & \\ \hline \mathrm { Cr } & \text { Accrued salaries expense } & & 15000 \\ \hline \end{array}\] C) \[\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Accrued salaries expense } & 12840 & \\ \hline \mathrm { Dr } & \text { Salaries expense } & 2160 & \\ \hline \mathrm { Cr } & \text { Cash } & & 15000 \\ \hline \end{array}\] D) \[\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 12840 & \\ \hline \mathrm { Dr } & \text { Accrued salaries expense } & 2160 & \\ \hline \mathrm { Cr } & \text { Cash } & & 15000 \\ \hline \end{array}\] A) \[\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 15000 & \\ \hline \mathrm { Cr } & \text { Cash } & & 15000 \\ \hline \end{array}\] B) \[\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 15000 & \\ \hline \mathrm { Cr } & \text { Accrued salaries expense } & & 15000 \\ \hline \end{array}\] C) \[\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Accrued salaries expense } & 12840 & \\ \hline \mathrm { Dr } & \text { Salaries expense } & 2160 & \\ \hline \mathrm { Cr } & \text { Cash } & & 15000 \\ \hline \end{array}\] D) \[\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 12840 & \\ \hline \mathrm { Dr } & \text { Accrued salaries expense } & 2160 & \\ \hline \mathrm { Cr } & \text { Cash } & & 15000 \\ \hline \end{array}\]

Penneshaw 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 Penneshaw Ltd related to this share option for the year ended 30 June 2012?

A) $16 000 B) $20 000 C) $21 333 D) $26 400 A) $16 000 B) $20 000 C) $21 333 D) $26 400

Exam 17: Accounting for Share-Based Payments

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: Year ending 30 June Condition 2010 If earnings have increased by >18\% 2011 If earnings have increased by >13\% averaged across the 2 year period 2012 If earnings have increased by at least 10\% averaged across the 3 year period The following information is available: $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 $20.The vesting conditions allow shares to vest if the following performance targets are achieved: \begin{array} { | l | l | } \hline \text { Year ending } 30 \text { June } &{ \text { Condition } } \\ \hline 2010 & \text { If earnings have increased by } > 18 \% \\ \hline 2011 & \begin{array} { l } \text { If earnings have increased by } > 13 \% \text { averaged across } \\ \text { the 2 year period } \end{array} \\ \hline 2012 & \begin{array} { l } \text { If earnings have increased by at least } 10 \% \text { averaged } \\ \text { across the 3 year period } \end{array} \\ \hline \end{array} The following information is available: What action must Wigan Ltd take that is in compliance with AASB 2,if the option does not vest on 30 June 2012?$ What action must Wigan Ltd take that is in compliance with AASB 2,if the option does not vest on 30 June 2012?

(Multiple Choice)

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Question 41

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

(Multiple Choice)

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Question 42

If a grant of equity instruments is conditional upon satisfying specified vesting conditions,the vesting conditions shall be taken into account in estimating the fair value of the instruments at measurement date.

(True/False)

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Question 43

To assist users of financial statements an entity must provide the effect of expenses arising from share-based transactions on the entity's profit or loss for the period.

(True/False)

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Question 44

Liverpool 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 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. Year ending 30 June Actual departures Revised estimate of departures before the option vests 2010 4 Further 7 2011 4 Further 4 2012 3 NA 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 2010?

(Multiple Choice)

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Question 45

If the fair value of the equity instruments granted in a share-based payment transaction cannot be estimated,the entity shall measure the fair value of the goods received.

(True/False)

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Question 46

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

(Multiple Choice)

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Question 47

When a good or service is acquired in a share-based payment transaction and it does qualify as an asset,the transaction must be expensed.

(True/False)

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Question 48

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

(Multiple Choice)

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Question 49

AASB 2 requires all share-based payment transactions to be expensed on grant date and the credit is equity.

(True/False)

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Question 50

On 1 July 2012 York Ltd (a start-up biotech company)grants its senior manager a choice of receiving cash equivalent of 100 000 shares or 120000 shares.The grant is conditional upon the senior manager working for the entity for 3 years but if the share alternative is chosen,the grant vests after two years.At grant date the entity's share price is $12.50.The entity does not expect to pay dividends in the next 3 years.After taking into account the effects of post-vesting transfer restrictions,the entity estimates the grant-date fair value of the share alternative to be $12. What is the fair value of the equity component of the compound instrument?

(Multiple Choice)

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Question 51

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

(Multiple Choice)

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Question 52

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: Year ending Fair value Intrinsic value 30 June 2010 \ 7.20 30 June 2011 \ 7.75 30 June 2012 \ 9.10 \ 7.50 30 June 2013 \ 10.70 \ 10.00 30 June 2014 \ 12.50 Summary of actual and estimated employee departures and number of options exercised follow: Year ending 30 June Actual departures Revised estimates of departures before the option vests Number of employees that exercised 2010 3 Further 6 2011 4 Further 3 2012 2 NA 15 2013 - - 14 2014 - - 12 What is the journal entry to recognise salary expense for Southport Ltd related to the share appreciation rights issued 1 July 2009 for the year ended 30 June 2014?

(Multiple Choice)

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Question 53

Market prices for share options granted to employees are typically not available because:

(Multiple Choice)

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Question 54

Issue of shares in exchange for shares of another entity in a purchase transaction of the net assets of an entity in a business combination is within the scope of AASB 2 Share-based Payment.

(True/False)

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Question 55

If the arrangement in a share-based transaction provides either the entity or the counter party with the choice of cash settlement or issuance of the equity instruments,what is the accounting treatment required in AASB 2?

(Multiple Choice)

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Question 56

On 1 July 2012,Manchester Ltd granted 50 000 share options to its Chief Executive Officer with an exercise price of $40 per share,conditional upon the entity achieving the following non-market vesting conditions: Year ending 30 June Condition 2013 lf earnings have increased by >12\% 2014 If earnings have increased by >10\% averaged across the 2 year period 2015 If earnings have increased by at least 8\% averaged across the 3 year period Earnings information available follows: $On 1 July 2012,Manchester Ltd granted 50 000 share options to its Chief Executive Officer with an exercise price of $40 per share,conditional upon the entity achieving the following non-market vesting conditions: \begin{array} { | l | l | } \hline \text { Year ending 30 June } & { \text { Condition } } \\ \hline 2013 & \text { lf earnings have increased by } > 12 \% \\ \hline 2014 & \begin{array} { l } \text { If earnings have increased by } > 10 \% \text { averaged across } \\ \text { the 2 year period } \end{array} \\ \hline 2015 & \begin{array} { l } \text { If earnings have increased by at least } 8 \% \text { averaged } \\ \text { across the 3 year period } \end{array} \\ \hline \end{array} Earnings information available follows: In accordance with AASB 2,when will this share option vest?$ In accordance with AASB 2,when will this share option vest?

(Multiple Choice)

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Question 57

Discuss the three main headings required to be disclosed by AASB 2 with respect to share-based payments.

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Question 58

Penneshaw 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: Year ending 30 June Estimate of departures before the option vests Fair value of option at end of period 2010 10 \ 14 2011 12 \ 18 2012 14 (actual) \ 20 What is the employee benefits expense of Penneshaw Ltd related to this share option for the year ended 30 June 2012?

(Multiple Choice)

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Question 59

North Terraces Ltd issued share options to its executives two years ago.The options did not vest and have now expired.The cumulative salary benefits expense related to this option issue before its expiry amounts to $150 000.What is the appropriate course of action to take for North Terraces Ltd that is in accordance with AASB 2?

(Multiple Choice)

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Question 60

Showing 41 - 60 of 77

Exam 17: Accounting for Share-Based Payments

If a grant of equity instruments is conditional upon satisfying specified vesting conditions,the vesting conditions shall be taken into account in estimating the fair value of the instruments at measurement date.

To assist users of financial statements an entity must provide the effect of expenses arising from share-based transactions on the entity's profit or loss for the period.

If the fair value of the equity instruments granted in a share-based payment transaction cannot be estimated,the entity shall measure the fair value of the goods received.

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

When a good or service is acquired in a share-based payment transaction and it does qualify as an asset,the transaction must be expensed.

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

AASB 2 requires all share-based payment transactions to be expensed on grant date and the credit is equity.

Market prices for share options granted to employees are typically not available because:

Issue of shares in exchange for shares of another entity in a purchase transaction of the net assets of an entity in a business combination is within the scope of AASB 2 Share-based Payment.

If the arrangement in a share-based transaction provides either the entity or the counter party with the choice of cash settlement or issuance of the equity instruments,what is the accounting treatment required in AASB 2?

Discuss the three main headings required to be disclosed by AASB 2 with respect to share-based payments.

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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