SHARE-BASED COMPENSATION

1. On January 1, 2015, Kadenang Ginto Company granted 100 share options each to 500 employees, conditional
upon the employee’s remaining in the entity’s employ during the vesting period. The share options vest at the end
of the three-year period. On grant date, each share option has a fair value of P30. The par value per share is
P100 and the option price is P120.

On December 31, 2016, 30 employees have left and it is expected that on the basis of a weighted average
probability, a further 30 employees will leave before the end of the three-year period.

On December 31, 2017, only 20 employees actually left and all of the share options are exercised on such date.

What is the compensation expense for 2015, 2016, and 2017?

2. On January 1, 2015, Probinsyano Company granted 60,000 share options to employees. The share options will
vest at the end of three years provided the employees remain in service until then. The option price is P60 and
the par value per share is P50. At the date of grant, the entity concluded that the fair value of the share options
cannot be measured reliably. The share options have a life of 4 years which means that the share options can be
exercised within one year after vesting. The share prices are: P62 on December 31, 2015: P66 on December 31,
2016: P75 on December 31, 2017: and P85 on December 31, 2018. All share options were exercised on
December 31, 2018.

What is the compensation expense for 2015, 2016, 2017, and 2018?

3. On January 1, 2015, Killer Bride Company established a share appreciation rights to plan for the executives.
The plan entitled them to receive cash at any time during the next four years for the difference between the
market price of the ordinary share and a pre-established price of P20 on 60,000 share appreciation rights (SARs).
On December 31, 2017, the 20,000 SARs are exercised by the executives.
Market Price
January 1, 2015 25 per share
December 31, 2015 28 per share
December 31, 2016 35 per share
December 31, 2017 30 per share

What is the compensation expense for 2015 and 2016?

What amount should be recognized as accrued liability for SARs on December 31, 2017?

OTHER COMPREHENSIVE INCOME

1. On January 1, 2009, Kara Mia Company purchased a new building at a cost of P6,000,000. Depreciation was
computed on a straight line basis at 4% per year. On January 1, 2014, the building was revalued at a fair value of
P8,000,000.

What is the Depreciation and Revaluation surplus on December 31, 2014?

2. General’s Daughter Company acquired a financial instrument for P4,000,000 on March 31, 2014. The financial
instrument is classified as financial asset at fair value through other comprehensive income. The direct acquisition
cost incurred amounted to P700,000. On December 31, 2014, the fair value of the instrument was P5,000,000
and the transaction costs that would be incurred on the sale of the investment are estimated at P600,000. What
gain should be recognized in other comprehensive income for the year ended December 31, 2014?

3. On December 31, 2014, Los Bastardos Company appropriately reported a P100,000 unrealized loss. There
was no change during 2015 in the composition of the portfolio of marketable equity securities held as financial
asset at fair value through other comprehensive income.

Security Cost Market value December 31, 2015

A 1,200,000 1,300,000
B 900,000 500,000
C 1,600,000 1,500,000

What amount of loss on these securities should be included in the statement of comprehensive income for the
year ended December 31, 2015 as component of other comprehensive income?

4. A defined benefit plan revealed the following information on January 1, 2015:

Fair value of plan assets 4,500,000
Projected benefit obligation (4,000,000)
Prepaid/accrued benefit cost – surplus 500,000
Asset ceiling (300,000)
Effect of asset ceiling 200,000

The following data are provided for the current year:

Current service cost 900,000
Actual return on plan assets 1,000,000
Contribution to the plan 700,000
Benefits paid 200,000
Actuarial gain due to decrease in BPO 300,000
Asset ceiling on December 31, 2015 800,000
Discount raite 10%

5. Reclassification from FVTPL to Amortized Cost

On Jan 1, 2018, an entity purchased a portfolio of bonds in accordance with the business model of managing
financial assets by selling the bonds in the short term.

The acquisition cost is 6,000,000 and the face value of the bonds is 5,000,000.

During 2018, no securities were sold and on December 31, 2018, the fair value of the bonds is 5,500,00.

In December, the entity acquired another entity that manages commercial bonds and has a business model that
holds bonds in order to collect contractual cash flows thus effectively changes the business model of the entity.

On December 31, 2019, the fair value of the bonds is 5,200,000.

6. Reclassification from Amortized Cost to FVTPL
On Jan 1, 2018, an entity purchased 5,000,000 face value bonds for 4,500,000 in accordance with the business
model of managing financial asset by collecting contractual cash flows. The bonds pay interest annualy on Dec
31.

In Dec 2018, the objective of the entity's business model for managing the bonds has changed from collecting
contractual cash flows to realizing gains.

On Dec 31, 2018, assume the carrying amount of the bond investment is 4,700,000 after recording the effective
amortization of discount of 200,000.

On Jan 1, 2019, the fair value of the bond investment is 5,500,000.