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ACC402-2023-IfRS 2-Study Guide and Review Questions

This document contains review questions on IFRS 2 Share-Based Payment. It includes questions on: - Key terms in IFRS 2 such as share-based payment transactions, vesting conditions, and fair value - Examples of non-market and market-based vesting conditions - Recognition and measurement requirements of IFRS 2 - Disclosure requirements of IFRS 2 - Practice questions calculating share-based payment expenses over multiple periods for share options and cash-settled share appreciation rights

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Billiee Butccher
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67 views3 pages

ACC402-2023-IfRS 2-Study Guide and Review Questions

This document contains review questions on IFRS 2 Share-Based Payment. It includes questions on: - Key terms in IFRS 2 such as share-based payment transactions, vesting conditions, and fair value - Examples of non-market and market-based vesting conditions - Recognition and measurement requirements of IFRS 2 - Disclosure requirements of IFRS 2 - Practice questions calculating share-based payment expenses over multiple periods for share options and cash-settled share appreciation rights

Uploaded by

Billiee Butccher
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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UNIVERSITY OF CAPE COA ST

COLLEGE OF HUMANITIES AND LEGAL STUDIES


SCHOOL OF BUSINESS
DEPARTMENT OF ACCOUNTING
ADVANCED FINANCIAL REPORTING

REVIEW QUESTIONS - IFRS 2 SHARE-BASED PAYMETNTS


Section A-A guide to reading the IFRS 2-Share-Based Payment
1. Explain the meaning of the following terms in IFRS 2
a. Share-based payment transaction
b. Share-based payment arrangement
c. Equity-settled share-based payment transaction
d. Cash-settled share-based payment transaction
e. Share option
f. Fair Value
g. Grant date
h. Vesting conditions
i. Vesting period
2. Describe and give two (2) examples each of non-market based vesting conditions and market based vesting
conditions.
3. What are the recognition and measurement requirements
4. State the disclosure requirements of IFRS 2.
Section B- IFRS 2-Share-Based Payment Practice Questions
Question 1
On 1 January 2016 an entity grants 100 share options to each of its 400 employees. Each grant is conditional
upon the employee working for the entity until 31 December 2018. The fair value of each share option is
GH¢20.
During 2016 20 employees leave and the entity estimates that 20% of the employees will leave during the
three-year period. During 2017 a further 25 employees leave and the entity now estimates that 25% of its
employees will leave during the three-year period. During 2018 a further 10 employees leave.

pg. 1
Required
Calculate the remuneration expense that will be recognised in respect of the share-based payment
transaction for each of the three years ended 31 December 2018.

Question 2
On 1 January 2018 an entity grants 250 share options to each of its 200 employees. The only condition
attached to the grant is that the employees should continue to work for the entity until 31 December 2021.
Five employees leave during the year.
The market price of each option was GH¢12 at 1 January 2018 and GH¢15 at 31 December 2018.

Required
Show how this transaction will be reflected in the financial statements for the year ended 31 December
2018.

Question 3
J&B granted 200 options on its GH¢1 ordinary shares to each of its 800 employees on 1 January 2018. Each
grant is conditional upon the employee being employed by J&B until 31 December 2020. J&B estimated at 1
January 2018 that:
(i) The fair value of each option was GH¢4 (before adjustment for the possibility of forfeiture).
(ii) Approximately 50 employees would leave during 2018, 40 during 2019 and 30 during 2020
thereby forfeiting their rights to receive the options. The departures were expected to be evenly
spread within each year.
The exercise price of the options was GH¢1.50 and the market value of a J&B share on 1 January 2018 was
GH¢3. In the event, only 40 employees left during 2018 (and the estimate of total departures was revised
down to 95 at 31 December 2018), 20 during 2019 (and the estimate of total departures was revised to 70 at
31 December 2019) and none during 2020, spread evenly during each year.

Required
Directors of J&B have asked you to illustrate how the scheme is accounted for under IFRS 2 Share-based
payment.

pg. 2
a) Show the double entries for the charge to profit or loss for employee services over the three years
and for the share issue, assuming all employees entitled to benefit from the scheme exercised their
rights and the shares were issued on 31 December 2020.
b) Explain how your solution would differ had J&B offered its employees cash based on the share
value rather than share options

Question 4
On 1 January 2018 an entity grants 100 cash share appreciation rights (SARS) to each of its 500 employees,
on condition that the employees continue to work for the entity until 31 December 2020.
During 2018, 35 employees leave. The entity estimates that a further 60 will leave during 2019 and 2020.
During 2019, 40 employees leave and the entity estimates that a further 25 will leave during 2020.
During 2020, 22 employees leave.
At 31 December 2020 150 employees exercise their SARs. Another 140 employees exercise their SARs at
31 December 2021 and the remaining 113 employees exercise their SARs at the end of 2022.
The fair values of the SARs for each year in which a liability exists are shown below, together with the intrinsic
values at the dates of exercise.
Fair value Intrinsic value
GH¢ GH¢
2018 14.40 -
2019 15.50 -
2020 18.20 15.00
2021 21.40 20.00
2022 25.00

Required
Calculate the amount to be recognised in the profit or loss for each of the five years ended 31 December
2022 and the liability to be recognised in the statement of financial position at 31 December for each of
the five years.

pg. 3

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