Intermediate Accounting III

March 19, 2020

2:30-4:00 pm

Share-based Compensation
Share Appreciation Right

January 1, 2016 200

December 31, 2016 210
Salaries 50,000
Accrued salaries payable 50,000

December 31, 2017 220

Salaries 150,000
Accrued salaries payable 150,000

December 31, 2018 240

Salaries 400,000
Accrued salaries Payable 400,000

December 31, 2019 250 December 31, 2019 200

Salaries 400,000 Market price of share – 12/31/19 200
Accrued salaries payable 400,000 Predetermined price – 1/1/16 200
Excess 0
January 1, 2020
Accrued salaries payable 1,000,000 Reversal:
Cash 1,000,000 Accrued salaries payable 600,000
Gain on reversal of SAR 600,000
250-200=50 x 20,000 = 1,000,000 200-200=0 x 20,000 = P0

Cash and Share Alternative

On January 1, 2019, an entity granted to an employee the right to choose EITHER:
a. Share alternative – equal to 12,000 shares
b. Cash alternative – cash payment equal to market value of 10,000 phantom shares
The grant is conditional upon the completion of three years of service. If the employee chooses the share alternative, the
shares must be held for three years after vesting date. The par value of the share is P25 and at grant date on January 1,
2019, the share price is P51. The share prices for the three-year vesting period are P54 on December 31, 2019, P60 on
December 31, 2020 and P65 on December 31, 2021. After taking into account the effects of post-vesting restrictions, the
entity has estimated that the fair value of the share alternative is P48 per share.

Compound Financial Instrument ===> Fair value of share alternative (12,000 x P48) 576,000
Financial liability + Equity Fair value of liability on grant date (10,000 x 51) 510,000
Equity Component 66,000

2019
12/31 Salaries (66,000/3) 22,000 Market value of shares – 12/31/2019 54
Share options outstanding 22,000 Predetermine price 0
Excess 54
Salaries 180,000 Multiply: No. of shares 10,000
Accrued salaries payable 180,000 Total liability 540,000
Divided: three years 3
Accrued liability – 2019 180,000
2020
12/31 Salaries 22,000 Market value of shares – 12/31/2020 60
Share options outstanding 22,000 Predetermined price 0
Excess 60
Salaries (600,000/3x2 – 180,000) 220,000 Multiply: No. of Shares 10,000
Accrued salaries payable 220,000 Total liability 600,000

2021
12/31 Salaries 22,000 Market value of shares – 12/31/2021 65
Share options outstanding 22,000 Predetermined price 0
Excess 65
Salaries (650,000-400,000) 250,000 Multiply: No. of Shares 10,000
Accrued salaries payable 250,000 Total liability 650,000
If the employee has chosen the cash alternative:
12/31 Accrued salaries payable 650,000
Share options outstanding 66,000
Cash 650,000
Share premium 66,000

If the employee has chosen the equity alternative:

12/31 Accrued salaries payable 650,000
Share options outstanding 66,000
Share capital (12,000x25) 300,000
Share premium 416,000