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Week 3 Share Based Compensation Problems

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Paul Rexie
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45 views

Week 3 Share Based Compensation Problems

Uploaded by

Paul Rexie
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

At the beginning of 2021, Kaye Corporation grants 100 share options to each of its 200
employees. Each grant is conditional upon the employee working for the entity over the next
three years. The entity estimates that the fair value of each share option is P45.
On the basis of a weighted average probability, the entity estimates that 25 percent of
employees will leave during the three-year period and therefore forfeit their rights to the share
options.
During 2021, 10 employees leave. The entity revises its estimate of total employee departure
over the three-year period from 25 percent to 20 percent. During 2022, a further 8 employees
leave. The entity revises its estimate of total employee departures over the three-year period
from 20 percent to 15 percent. During 2023, a further 6 employees leave.

Question 1: Compensation expense in 2021?


Question 2: Compensation expense in 2022?
Question 3: Compensation expense in 2023?

2. On January 1, 2018, an entity granted the employees option to buy 200,000 shares with P20 par
for P30 per share. The employees exercised the options on January 1, 2021. Quoted market
prices of shares are as follows:
2018: 34 2020: 42
2019: 39 2021: 44
The service period is for two years beginning January 1, 2018. The fair value of the share options
cannot be measured reliably.

Question 1: What is the compensation expense for 2018?


Question 2: What is the compensation expense for 2019?
Question 3: What is the compensation expense for 2020?
Question 4: What amount should be credited to share premium upon exercise of the share
options on January 1, 2021?

3. Joseph Company, an unlisted entity, decided to issue 1,000 share options to an employee in lieu
of many years’ services. However, the fair value of the share options cannot be reliably
measured as the entity operates in a highly specialized market where there are no comparable
companies. The exercise price is P100 per share and the options were granted on January 1,
2021, when the value of the shares was also estimated at P100 per share. At the end of the
financial year, December 31, 2021, the value of the shares was estimated at P150 per share and
the options vested on that date. What value should be placed on the share options issued for
the year ended December 31, 2021?

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