Page 536 - F2 Integrated Workbook STUDENT 2019

F2: Advanced Financial Reporting

CHAPTER 4 – SHARE BASED PAYMENTS

4.1 B

Vesting conditions can be based on any non-market based (e.g. periods of
employment, internal performance indicators, financial targets) and market
based conditions (e.g. shares prices reaching a target price). Therefore, they
are not exclusively associated with periods of employment. A is incorrect.

Equity settled share based payments use the FV of the option as at the grant
date. Only cash settled share based payments are valued at the FV of the
payment at the year end. C is incorrect

Expected numbers of options to vest are used to help calculate the expense
shown within an entity’s statement of profit or loss. The expected number of
options to vest should be revised each year, taking into consideration further
information that has arisen during the period e.g. actual leavers. This ensures
that the accounting entries reflect the most accurate information available at
that point in time. D is incorrect.

4.2 $22,800

Equity settled share-based payments paid to employees are valued using:

 fair value at the grant date
 the expected number of options to vest

 spread over the vesting period.

In 20X6, the expense charged to P/L will be $22,800

Total cost = 3 × 100 × ((400 – 20) × 80%) = $91,200

Spread over vesting period/4 years

Expense for the year = $22,800

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