On January 1, 2019, an entity offered management 1,000 share appreciation rights to employees.

The ser

December 31, 2019 P

December 31, 2020
December 31, 2021

All of the 1000 SARS were exercised on January 1, 2022. The intrinsic value is equal to the fair value of
(payout)

Year 1 Year 2
No. of SARs 1,000.00 No. of SARs 1,000.00
FV of SAR 9 FV of SAR 12
Total 9,000.00 Total 12,000.00
Vesting period 1/3 Vesting period 2/3
Salaries Expense, Y1 3,000.00 Total 8,000.00
Cumm. Salaries Expense (3,000.00)
Salaries Expense, Y2 5,000.00

Salaries Expense 3,000.00 Salaries Expense 5,000.00

Accrued Salaries Pay 3,000.00 Accrued Salaries Payable 8,000.00

Salaries Expense 3,000.00

Accrued Salaries Payable

To record the exercise of SARs

January 1, 2022' Accrued Salaries Payable 15,000.00
Cash
ppreciation rights to employees. The service period is 3 years and the exercise date is January 1, 2022.

Fair value of each SAR

9
12
15

rinsic value is equal to the fair value of SARs of P 15 on December 31, 2021.

Year 3
No. of SARs 1,000.00
FV of SAR 15
Total 15,000.00
Vesting period 1
Total 15,000.00
Cumm. Salaries Expe (8,000.00)
Salaries Expense, Y3 7,000.00

Salaries Expense 7,000.00

Accrued Salaries Paya 15,000.00

3,000.00

15,000.00
C. Co issued share appreciation rights (SARs) to 40 of its employees. The SARs will vest at the end of 3 y
company and provided the average revenue growth over the period will exceed 5%. The share option enti
average growth rate is:

Average Revenue Growth Percentage No. of SARs per employee

5 to 10 1000
11 to 15 2000
More than 15% 3000

On the grant date, each SAR has a fair value of P60. C expects an average revenue growth rate of 8% du
period, and that 16 of its employees will leave before the vesting period ends.

1. Assuming the estimates do not change during Year 1 and the fair value of each SAR is P60, the compe

2. At the end of Year 2, the average revenue growth projection over the three-year vesting period is 11% a
employ. The fair value of each SAR is P70. The compensation expense in Year 2 is ___.

3. At the end of Year 3, the average revenue growh over the three-year vesting period is 13% and 36 emp
SAR is P80. The compensation expense in Year 3 is ______.

Year 1 Year 2
No. of Employees 24 No. of Employees 32
No. of Share Option 1000 No. of Share Options 2000
FV of Each SAR 60 FV of Each SAR 70
Total 1,440,000.00 Total 4,480,000.00
Vesting Period 1/3 Vesting Period 2/3
Salaries Expense, 480,000.00 Total 2,986,666.67
Cumm. Salaries Expense (480,000.00)
Salaries Expense, Y2 2,506,666.67

Salaries Expense 480,000.00 Salaries Expense 2,506,666.67

Accrued Salaries Pa 480,000.00 Accrued Salaries Payable 2,986,666.67
 Rs will vest at the end of 3 years, provided the employees remain with the
ed 5%. The share option entitlement of each employee depending upon the

Y1%
s per employee Y2%
Y3%
Total
Vesting period
Average revenue gro

evenue growth rate of 8% during the 3-year vesting Total no. of employee
Expected to leave
No. of Employees

each SAR is P60, the compensation expense in Year 1 is _____.

-year vesting period is 11% and 32 employees are expected to remain in the entity's
ar 2 is ___.

ng period is 13% and 36 employees did not leave the company. The fair value of each

Year 3
No. of Employees 36
No. of Share Options 2000
FV of Each SAR 80
Total 5,760,000.00
Vesting Period 1
Total 5,760,000.00
Cumm. Salaries Expense (2,986,666.67)
Salaries Expense, Y3 2,773,333.33

Salaries Expense 2,773,333.33

Accrued Salaries Payable 5,760,000.00
Year 1 Year 2 Year 3
8% 8%
8% 12%
8% 13%
24% 33%
3.00 3.00 3.00
8% 11% 13%

40 40 40
16 8 4
24 32 36
On January 1, 20x1, ABC Co. grants 100 cash share appreciation rights (SARs) to each of its 300 employ

During 20x1, 21 employees left and ABC estimates that additional 36 employees will leave during 20x2 an
During 20x2, 24 employees left and ABC estimates that additional 15 employees will leave during 20x3.
During 20x3, 13 employees left.

The SARS were exercised as follows:

Date Number of employees who exercised their SARs
12/31/20x3 90
12/31/20x4 84
12/31/20x5 68

The fair values and intrinsic values of the SARs at the dates of exercise (which equal the cas paid out) at t

Date Fair value of SARs Intrinsic Value

12/31/20x1 14.4
12/31/20x2 15.5
12/31/20x3 18.2 15
12/31/20x4 21.4 20
12/31/20x5 - 25

Year 1 Year 2
No. of SAR 100 No. of SAR 100
No. of employees 243 No. of employees 240
FV of SAR 14.4 FV of SAR 15.5
Total 349,920.00 Total 372,000.00
Vesting Period 1/3 Vesting Period 2/3
Salaries Expense, Y1 116,640.00 Total 248,000.00
Cumm. Salaries Exp (116,640.00)
Salaries Expense, Y2 131,360.00

Salaries Expense 116,640.00 Salaries Expense 131,360.00

Accrued Salaries Payable 116,640.00 Accrued Salaries Payable 248,000.00
 each of its 300 employees, on condition that the employees remain in its employ for the next three years.
Actual no. of
will leave during 20x2 and 20x3. Total No. of Emplo Employees Left
will leave during 20x3. Y1 300 21
Y2 300 45
Y3 300 58
Y4 300 58
Y5 300 58

ual the cas paid out) at the end of 20x3, 20x4 and 20x5 are shown below:

Year 3
No. of SAR 100 No. of SAR
No. of employees 152 No. of employees
FV of SAR 18.2 FV of SAR
Total 276,640.00 Total
Vesting period 1 Vesting period
Total 276,640.00 Total
Cum. Salaries Expense (248,000.00) Cum. Liability
Salaries Expense, Y3 28,640.00 Salaries Expense, Y3

No. of SAR/ employee 100 No. of SAR/ employee

No. of employees (exercised) 90 No. of employees (exercised)
Intrinsic value 15 Intrinsic value
Salaries Expense, Y3 135,000.00 Salaries Expense, Y3

Salaries Expense 163,640.00 Salaries Expense

Accrued Salaries Payable 276,640.00 Accrued Salaries Payable
the next three years.
No. of employees No. of employees
Estimated to Leave Exercised SARS Total
36 243
15 240
0 90 152
174 68
242 0

Year 4 Year 5
100 No. of SAR 100
68 No. of employees 0
21.4 FV of SAR 0
145,520.00 Total -
1 Vesting period 1
145,520.00 Total 0
(276,640.00) Cum. Liability (145,520.00)
(131,120.00) Salaries Expense (145,520.00)

100 No. of SAR/ emplo 100

84 No. of employees ( 68
20 Intrinsic value 25
168,000.00 Salaries Expense, 170,000.00

36,880.00 Salaries Expense 24,480.00

145,520.00 Accrued Salaries P -
On January 1, 20x1, ABC Co. granted to an employee the right to choose either of the following:
a. 1000 phantom shares (i.e., a right to a cash payment equal to the value of 1,000 shares), or
b. 1,200 shares

The grant is conditional upon the completion of 3 years' service. If the employee chooses the share alterna
ABC estimates that the grant date fair value of the share alternatives is P56 per share.

ABC's share has a par value of P10 per share. Market prices per share are shown below:
January 1, 20x1
December 31, 20x1
December 31, 20x2
December 31, 20x3

Fair value of debt component 1000 x 60 60,000.00

Fair value of equity component 1200 x 56 67,200.00

Compound Instrument 67,200.00

FV of Debt Component 60,000.00
Equity Component 7,200.00

Year 1
Debt Component Equity Component
No. of Shares 1000 FV of Equity Component
FV of Shares 72 Vesting period
Total 72,000.00 Salaries Expense - Equity Y1
Vesting period 1/3
Salaries Expense - Debt Y1 24,000.00

Year 2
Debt Component Equity Component
No. of Shares 1000 FV of Equity Component
FV of Shares 78.00 Vesting period
Total 78,000.00 Total
Vesting period 2/3 Cum. Salaries Expense
Total 52,000.00 Salaries Expense - Equity Y2
Cum. Salaries Expense (24,000.00)
Salaries Expense - Debt Y2 28,000.00

Year 3
Debt Component Equity Component
No. of Shares 1000 FV of Equity Component
FV of Shares 81.00 Vesting period
Total 81,000.00 Total
Vesting period 1 Cum. Salaries Expense
Total 81,000.00 Salaries Expense - Equity Y3
Cum. Salaries Expense (52,000.00)
Salaries Expense - Debt Y3 29,000.00

Journal Entry
Employee - Equity Settlement Assuming Par Value = P10

Accrued Salaries Payable 81,000.00

Share Premium - SO 7,200.00
Ordinary Share Capital 12,000.00
Share Premium 76,200.00

Employee - Cash Settlement

Accrued Salaries Payable 81,000.00

Share Premium - SO 7,200.00
Cash 81,000.00
Share Premium 7,200.00
t to choose either of the following:
to the value of 1,000 shares), or

e. If the employee chooses the share alternative, the shares must be held for three years after vesting date.
natives is P56 per share.

per share are shown below:

60
72
78
81

Compound instrument

uity Component
of Equity Component 7,200.00 Salaries Expense 26,400.00
1/3 Accrued Salaries Payable 24,000.00
aries Expense - Equity Y1 2,400.00 Share Premium - SO 2,400.00

uity Component
of Equity Component 7,200.00 Salaries Expense 30,400.00
2/3 Accrued Salaries Payable 52,000.00
4,800.00 Share Premium - SO 4,800.00
m. Salaries Expense (2,400.00)
aries Expense - Equity Y2 2,400.00

uity Component
of Equity Component 7,200.00 Salaries Expense 31,400.00
1 Accrued Salaries Payable 81,000.00
 7,200.00 Share Premium - SO 7,200.00
m. Salaries Expense (4,800.00)
aries Expense - Equity Y3 2,400.00
Dr.
Cr.
Cr.

Salaries Expense 30,400.00

Accrued Salaries Payable 28,000.00
Share Premium - SO 2,400.00