Question 1

Briefly describe the keys points of AASB 2.

Accepted Answer

AASB 2, which stands for the Australian

Question 2

AASB 2 requires all share-based payment transactions to be measured at grant date.

Accepted Answer

A) True 
 B)False

Question 3

Where equity instruments are issued with a vesting period,the transactions must be recognised over the vesting period.

Accepted Answer

A) True 
 B)False

Question 4

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 2012?

Accepted Answer

A)  $36 667 
B)  $44 667 
C)  $46 667 
D)  $48 000 
A)  $36 667 
B)  $44 667 
C)  $46 667 
D)  $48 000

Question 5

Longreach 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 Longreach Ltd related to this share option for the year ended 30 June 2010?

Accepted Answer

A)  $18 667 
B)  $20 000 
C)  $26 667 
D)  $56 000 
A)  $18 667 
B)  $20 000 
C)  $26 667 
D)  $56 000

Question 6

AASB 2 requires some share-based payments to be recognised in an entity's financial statements.

Accepted Answer

A) True 
 B)False

Question 7

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 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 2011?

Accepted Answer

A) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 10827 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 10827 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 10827 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 10827 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 12377 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 12377 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 12377 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 12377 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 10827 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 10827 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 10827 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 10827 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 12377 & \
\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 12377 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 12377 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 12377 \
\hline
\end{array}$$

Question 8

AASB 2 states that when goods or services received or acquired in a share-based payment transaction do not qualify for recognition as assets,they shall be recognised as:

Accepted Answer

A)  liabilities. 
B)  equity. 
C)  income. 
D)  expenses. 
A)  liabilities. 
B)  equity. 
C)  income. 
D)  expenses.

Question 9

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 2012?

Accepted Answer

A) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 25000 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 25000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 30600 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 30600 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 33733 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 33733 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 39800 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 39800 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 25000 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 25000 \
\hline
\end{array}$$ 
B) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 30600 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 30600 \
\hline
\end{array}$$ 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 33733 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 33733 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Employee benefits expense } & 39800 & \
\hline \mathrm { Cr } & \text { Share capital (equity) } & & 39800 \
\hline
\end{array}$$

Question 10

On 1 July 2012 Lancaster Ltd grants 100 share options to each of its 50 employees conditional upon the employee working for the entity for the next 3 years.The entity estimates the fair value of each share option at $13.Based on probability estimates,25 employees are expected to leave the entity before the options vest.In accordance with AASB 2,how much remuneration expense related to the share option issue should Lancaster Ltd recognise for the year ended 30 June 2013?

Accepted Answer

A)  zero 
B)  $10 833 
C)  $32 500 
D)  $65 000 
A)  zero 
B)  $10 833 
C)  $32 500 
D)  $65 000

Question 11

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:
$$\begin{array} { | l | l | l | } 
\hline \text { Year ending 30 June } & \text { Actual departures } & \begin{array} { l } 
\text { Revised estimate of departures } \
\text { before option vests }
\end{array} \
\hline 2010 & 7 & 22 \% \
\hline 2011 & 6 & 18 \% \
\hline 2012 & 4 & \text { NA } \
\hline
\end{array}$$
In accordance with AASB 2,how much remuneration expense related to the share option issue should Blackburn Ltd recognise for the year ended 30 June 2010,30 June 2011 and 30 June 2012 respectively?

Accepted Answer

A)  $19 500; $33 800; $39 800 
B)  $23 400; $25 800; $30 600 
C)  $23 400; $29 900; $39 800 
D)  $23 833; $35 534; $33 733 
A)  $19 500; $33 800; $39 800 
B)  $23 400; $25 800; $30 600 
C)  $23 400; $29 900; $39 800 
D)  $23 833; $35 534; $33 733

Question 12

In a share-based payment transaction like an option,which of the following accounting treatments is incorrect?

Accepted Answer

A)  An entity shall recognise the goods or services received or acquired in a share-based payment transaction when it obtains the goods or as the services are received. 
B)  The entity shall recognise a corresponding increase in equity if the goods or services were received in an equity-settled share-based payment transaction. 
C)  The entity shall recognise a corresponding increase in liability if the goods or services were acquired in a cash-settled share-based payment transaction. 
D)  Goods or services received or acquired in a share-based payment transaction shall be recognised as expenses. 
A)  An entity shall recognise the goods or services received or acquired in a share-based payment transaction when it obtains the goods or as the services are received. 
B)  The entity shall recognise a corresponding increase in equity if the goods or services were received in an equity-settled share-based payment transaction. 
C)  The entity shall recognise a corresponding increase in liability if the goods or services were acquired in a cash-settled share-based payment transaction. 
D)  Goods or services received or acquired in a share-based payment transaction shall be recognised as expenses.

Question 13

On 1 July 2012 Chester Ltd granted an executive director a choice between receiving a cash payment equivalent to 5000 shares or receiving 6000 shares.The grant is conditional upon the director being under the employ of the entity for 3 years.What is the accounting treatment for this share-based payment arrangement that is consistent with AASB 2?

Accepted Answer

A)  similar treatment with cash-settled transactions 
B)  similar treatment with equity-settled transactions 
C)  similar to a compound financial instrument 
D)  recognise salaries benefit expense at vesting date 
A)  similar treatment with cash-settled transactions 
B)  similar treatment with equity-settled transactions 
C)  similar to a compound financial instrument 
D)  recognise salaries benefit expense at vesting date

Question 14

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 2011?

Accepted Answer

A)  $19 500 
B)  $24 200 
C)  $43 700 
D)  $57 000 
A)  $19 500 
B)  $24 200 
C)  $43 700 
D)  $57 000

Question 15

AASB 2 requires all equity-settled share-based payment transactions be measured at fair value of goods and services received.

Accepted Answer

A) True 
 B)False

Question 16

AASB 2 requires all share-based payment transactions to be recognised at:

Accepted Answer

A)  grant date. 
B)  balance date. 
C)  exercise date. 
D)  settlement date. 
A)  grant date. 
B)  balance date. 
C)  exercise date. 
D)  settlement date.

Question 17

Are there parties that would benefit from the accounting requirements of AASB 2?
 Discuss.

Accepted Answer

Despite the concerns raised about the li

Exam 17: Accounting for Share-Based Payments

Briefly describe the keys points of AASB 2.

AASB 2 requires all share-based payment transactions to be measured at grant date.

Where equity instruments are issued with a vesting period,the transactions must be recognised over the vesting period.

AASB 2 requires some share-based payments to be recognised in an entity's financial statements.

AASB 2 states that when goods or services received or acquired in a share-based payment transaction do not qualify for recognition as assets,they shall be recognised as:

In a share-based payment transaction like an option,which of the following accounting treatments is incorrect?

AASB 2 requires all equity-settled share-based payment transactions be measured at fair value of goods and services received.

AASB 2 requires all share-based payment transactions to be recognised at:

Are there parties that would benefit from the accounting requirements of AASB 2? Discuss.

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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