AFACR

1 IFRS-2 SBP August 2013 Q-4c (Marks 04)

During the year, FMCG launched a new product in the market and expected normal growth as
that of existing products. In order to motivate the sales force to achieve the target for three
years, the company granted 225 share options to each member of the sales team of 10
employees. At the grant date, the fair value of each option is Rs.25. The grant was based on the
condition that the employees remain in service over the next three years and the team sells
80,000 units of product over the three-year period.

During second year, the company increased the sales target to 120,000 units after positive
feedback from customers and widely acceptance of the product in the market.

By the end of third year, only 100,000 units have been sold and the share options do not vest.
All employees remained with the company for three years.

Required:

(i) Explain the accounting treatment of the above transaction under IFRS 2. (Marks 02)
(ii) Calculate the amounts to be recognized in the financial statements for each of the three
years of the scheme. (Marks 02)

2 IFRS-2 SBP February 2013 Q-4a (Marks 08)

Management of Star Company is worried about excessive turnover of employees. The HR

Director has suggested to grant 250 cash share appreciation rights (SARs) to each of its 400
employees subject to condition that the employees continue to work for the entity for three
years. The Board approved the proposal from July 1, 2009. The management expects that 20
employees will leave each year. During three years following employees left the company:

Years No. of Employees

2009-2010 20
2010-2011 24
2011-2012 30

On June 30, 2012, 125 employees exercised their rights. The fair value of the share
appreciation rights for the year in which a liability exists are shown below, together with the
intrinsic value at the date of exercise:

Fair value Intrinsic Value

(Rs.) (Rs.)

Jun-10 12.50 11.50

Jun-11 14.00 14.50
Jun-12 16.50 17.00

Required:

Calculate the amount to be presented in the statement of financial position and statement of
comprehensive income for three years from 2010 to 2012. (Marks 08)

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3 IFRS-2 SBP April2012 Q-4b (Marks 10)

Pak Electronics manufactures electronic items, which has a major domestic market share. However,
during the last few years due to entrance of two new companies manufacturing similar items there
has been a cutthroat competition. In order to maintain its market share the directors of the company
have come up with a new scheme to motivate its sales team. According to this scheme, each
member of the sales team consisting of 50 persons has been offered 25,000 shares options on
January 01, 2012.

In order to avail benefits of the scheme each employee was required to meet his/her annual sales
targets as well as to remain with the company for the next three (03) years.

Pak Electronics prepares its financial statements on December 31. At the grant date the value of
each share option was Rs.5. Assume that following events relating to the scheme will take place
during the next three (03) years:

In 2012:

Three (03) sales persons leave the company and another five (05) are expected to leave during
the next two (02) years.

In 2013:

Three (03) sales persons leave the company and another four (04) are expected to leave during
the next one (01) year.

In 2014:

Two (02) sales persons leave the company.

Required:

Show the effects of the above scheme in the Income Statement and Statement of Financial Position
of the company for the three (03) years.

4 IFRS-2 SBP June 2010 Q-4b (Marks 06)

Suppose you are the management accountant of U & S Publishing (Pvt.) Ltd. The company has
granted 200 options on its Rs.10 ordinary shares to each of its 250employees on July 1,2006.
The options are conditional upon the employees being employed by the company until June 30,
2009.

Following information is relevant:

 You estimate that the fair value of each option was Rs.40 on July 1, 2006.
 In 2006-07, 25 employees left and another 25 employees were expected to leave in
2007-08 and 2008-09.
 In 2007-08, 18 employees left and another 12 employees were expected to leave in
2008-09.
 In 2008-09, 15 employees left.

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Required:

How will the scheme be accounted for in the financial statements for the years ended June
30,2007, 2008 and 2009? (Marks 06)

5 IFRS-2 SBP December 2010 Q-4b (Marks 06)

For the last many years, M/s. ABC Limited has been facing the problem of turnover of staff. In
order to overcome this situation, management of the company has introduced many plans to
win the loyalty of the staff. On January 01, 2010, the company granted 200 cash share
appreciation rights (SAR) to each of its 500 employees provided that they would remain with the
company until December 31, 2012. Following is the relevant data as regards this scheme:

Assume that:

 During 2010, 30 employees leave. The entity estimates that a further 50 employees
would leave during 2011 and 2012.
 During 2011, 15 employees leave. The entity estimates that a further 45 employees
would leave during 2012.
 During 2012, 50 employees leave.

The fair value of one SAR for each year are shown below:

Year Fair value

(Rs.)
2010 10.00
2011 12.00
2012 15.00

Required:

Calculate the amount to be recognized as an expense in the Income Statement for each of the
three years ended to December 31, 2012 and the liability to be recognized in the Statement of
Financial Position at December 31, for each of the three years. (Marks 06)

The End

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