PHILIPPINE REVIEW INSTITUTE FOR ACCOUNTANCY, INC

MAY 2020 CPALE (BATCH NO. 05)

Financial Accounting and Reporting (FAR) Nenita S. Robles/ Floyd C. Paguio

SHARE-BASED PAYMENTS
(PFRS 2)
CLASSROOM DISCUSSION QUESTIONS
Employee share option plans
1. Required
a. The compensation expense for 20x1 is:
b. The compensation expense in 20x4 assuming one officer leaves the company in December 20x4 and that the
company expects that no other employee will leave by the end of the 6th year:

Suggested solution
1 Share options granted 200.00
No. of employees 10.00
No. of options granted 2,000.00
FV of each option at grant date 15.00
Total compensation expense for 6 years 30,000.00
Vesting period in years 6.00
Compensation expense - 2018 5,000.00

2 Share options granted 200.00

No. of employees entitled 9.00
No. of options granted 1,800.00
FV of each option at grant date 15.00
Total compensation expense for 6 years 27,000.00

Vested period (4/6) 18,000.00

Expense recognized in 2018 to 2020 15,000.00
Compensation expense - 2021 3,000.00

Service/ performance condition

2. Required
a. What is the amount recognized as expense in 2018?
b. Assuming that 5 employees left the company by the end of 2019, and it was estimated that another 10 employees
will leave by the end of 2016, furthermore, the actual revenue growth rate in 2019 was at 32.5% and that the
company expects that this rate will be sustained over the following year, what is the amount recognized as expense
in 2019?
c. Assuming that a total of 30 employees actually left the company in 2020, and the actual revenue growth rate in
2020 was at 62.5%, what is the amount recognized as expense in 2020?
d. Based on the previous item, assuming that half of the options vested were exercised in 2021, how much is the
credit to share premium account?

Suggested solution
1 Share options granted 100.00
No. of employees 500.00
No. of options granted 50,000.00
FV of each option at grant date 12.00
Total compensation expense for 6 years 600,000.00
Vesting period in years 3.00
Compensation expense - 2018 200,000.00

2 Revenue growth rate

2018 25.00%
2019 32.50%
2020 32.50%

PRIA: Share Based Payments (HO. No. 16)

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 PHILIPPINE REVIEW INSTITUTE FOR ACCOUNTANCY, INC
MAY 2020 CPALE (BATCH NO. 05)
Financial Accounting and Reporting (FAR) Nenita S. Robles/ Floyd C. Paguio

Average 30.00%

Share options granted 125.00

No. of employees entitled 485.00
No. of options granted 60,625.00
FV of each option at grant date 12.00
Total compensation expense for 6 years 727,500.00

Vested period (2/3) 485,000.00

Expense recognized in 2018 200,000.00
Compensation expense - 2019 285,000.00

3 Revenue growth rate

2018 25.00%
2019 32.50%
2020 62.50%
Average 40.00%

Share options granted 150.00

No. of employees entitled 465.00
No. of options granted 69,750.00
FV of each option at grant date 12.00
Total compensation expense for 6 years 837,000.00

Vested period (3/3) 837,000.00

Expense recognized in 2018 485,000.00
Compensation expense - 2019 352,000.00

4 Share options outstanding 418,500.00

APIC 174,375.00
Total 592,875.00

Share appreciation rights

3. Required
a. Assuming the estimates do not change during Year 1, the compensation expense in Year 1 is
b. At the end of Year 2, the average revenue growth projection over the three-year vesting period is 11% and 32
employees are expected to remain in the entity’s employ. The fair value of each SAR is ¥70. The compensation
expense in Year 2 is
c. At the end of Year 3, the average revenue growth over the three-year vesting period is 13% and 36 employees did
not leave the company. The fair value of each SAR is ¥80. The compensation expense in Year 3 is

Suggested solution
1 SARS granted 1,000.00
No. of employees 24.00
No. of options granted 24,000.00
FV of each SAR 60.00
Total compensation expense for 3 years 1,440,000.00
Vesting period in years 3.00
Compensation expense - Year 1 480,000.00

2 SARS granted 2,000.00

No. of employees 32.00

PRIA: Share Based Payments (HO. No. 16)

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 PHILIPPINE REVIEW INSTITUTE FOR ACCOUNTANCY, INC
MAY 2020 CPALE (BATCH NO. 05)
Financial Accounting and Reporting (FAR) Nenita S. Robles/ Floyd C. Paguio

No. of options granted 64,000.00

FV of each SAR 70.00
Total compensation expense for 3 years 4,480,000.00

Vested period (2/3) 2,986,666.67

Expense recognized in 2014 480,000.00
Compensation expense - Year 2 2,506,666.67

3 SARS granted 2,000.00

No. of employees 36.00
No. of options granted 72,000.00
FV of each SAR 80.00
Total compensation expense for 3 years 5,760,000.00

Vested period (3/3) 5,760,000.00

Expense recognized in 2014 2,986,666.67
Compensation expense - Year 3 2,773,333.33

Stock options/ warrants

4. Required
a. What is the credit to the Share premium account related to the issuance of ordinary shares through the exercise
of options on 3/30?
b. What amount should have been allocated to the Share warrants outstanding account as a result of the issuance
of the bonds with the detachable warrants?
c. What amount should be credited to the Share premium account as a result of the issuance of shares through the
rights exercised by stockholders?
d. What is the credit to the Share premium account from the exercise of warrants which were originally attached to
the bonds?
e. What is the adjusted balance of the Ordinary share options outstanding?
f. What is the balance of the of the Ordinary share warrants outstanding?

Suggested solution
1 Share options outstanding 11,250.00
APIC 72,000.00
Total 83,250.00

2 Issue Price 1,050,000.00

FV of Bonds without the warrants 998,000.00
FV of warrants 52,000.00

3 No. of rights issued 124,250.00

No. of rights needed for one share 10.00
No. of share issued 12,425.00
Par over exercise price 37.00
APIC 459,725.00

4 Share warrants outstanding 52,000.00

Par over exercise price 74,000.00
APIC 126,000.00

5 Share options outstanding 75,000.00

Exercised 11,250.00

PRIA: Share Based Payments (HO. No. 16)

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 PHILIPPINE REVIEW INSTITUTE FOR ACCOUNTANCY, INC
MAY 2020 CPALE (BATCH NO. 05)
Financial Accounting and Reporting (FAR) Nenita S. Robles/ Floyd C. Paguio

Balance 63,750.00

6 Nil

DO-IT-YOURSELF (DIY)

1. D 11. C
2. D 12. C
3. C 13. C
4. B 14. A
5. C 15. C
6. C 16. A
7. D 17. C
8. D 18. A
9. A 19. A
10. D 20. A

***
"Keep on going, and the chances are that you will stumble on something, perhaps
when you are least expecting it. I never heard of anyone ever stumbling on
something sitting down."
-- Charles F. Kettering

PRIA: Share Based Payments (HO. No. 16)

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