Ifrs 02

Advanced Accounting and Financial Reporting - A
IFRS 02 : Share Based P
List of topics to be covered :

i.Objective
ii.Definitions and Scope of IFRS 02
iii.Direct & Indirect measurement (Transaction with third parties)
iv.Equity-settled share-based payment (Transaction with employee)
*Service condition
*Non-market performance condition
*Market condition
v.Cash-settled share-based payment (Transaction with employee)
*Service condition
*Non-market performance condition
*Market condition
vi.Choice of settlement
*Choice is with the counter party (3rd parties)
*Choice is with the counter party (Employee)
*Choice is with the company
vii.Contract modification
*Transaction with employee (equity-settled) - Repricing
*Transaction with employee (equity-settled) - Different vesting period for extra award
*Transaction with employee (equity-settled) - Relaxation of market condition
*Transaction with employee (equity-settled) - Additional # of shares
Notes & Practice
Objective
The objective of IFRS 02 is to specify the financial reporting by an entity
when it undertakes a share-based payment transaction.
In particular, it requires an entity to reflect in its profit or loss and financial position
the effects of share-based payment transactions, including expenses
associated with transactions in which share options are granted to employees.
Definitions and Scope of IFRS 02
Share-based payment transaction

It is a transaction in which the entity -
(a) Receives goods or services from

the supplier of those goods or services including an employee
in a share-based payment arrangement
Company Agreement between 2 parties

Receives/Purchases goods/services
(b) Settles the amount or incurs an obligation to settle the transaction

owing in shares, share options
Company Agreement between 2 parties

Receives/Purchases goods/services
Settles the amount owing in shares, share options
Scope of IFRS 02 :
The following transactions are in the scope of IFRS 02 :
i.Equity-settled share-based payment transactions

The entity receives goods or services in exchange for equity instruments of the entity (incl
ii.Cash-settled share-based payment transactions

The entity receives goods or services in exchange for amounts of cash that are based on th
price (or fair value) of the entity’s shares or other equity instruments of the entity.
iii.Transactions with a choice of settlement

The entity receives goods or services and either
the entity or the supplier has a choice as to
whether the entity settles the transaction in cash or by issuing equity instruments.
i.e
ya tou entity kai khud kai paas choice ho ya phir supplier dictate karay to the entity kai mu
iss form mai required hai
iv.Transactions among group entities

Equity-settled transaction ho ya phir cash-settled transaction ho,
entity payment apnay ya group mai kisi bhi company kai shares ki form ya phir cash jiss ki v
of shares of a group entity
yeh transaction bhi IFRS 02 mai fall karay gi
Note!
Group means parent and its subsidiaries
Associates group ka part nahi hoti therefore uss ki treatment as per IFRS 09 hogi
The following transactions are outside the scope of IFRS 02 :
i.Transactions with employees and others in their capacity

as a holder of equity instruments of the entity
for e.g where an employee receives additional shares in a rights issue to all shareholders
ii.The issue of equity instruments in exchange for control

of another entity in a business combination IFRS 03
iii.Contracts to buy or sell non-financial items that may be settled net in shares or rights to
shares are outside the scope of IFRS 02 and are addressed by IAS 32 and IFRS 09
*Illustration Difference between IFRS 02 & IFRS 09

Q.Entity D enters into a contract to buy a commodity for use in its business for cash, at
a price equal to the value of 1,000 shares of Entity D at the date the commodity is delivere
Although Entity D can settle the contract net, it does not intend to do so, nor does it have a
practice of doing so.
Solution :
This transaction is within the scope of IFRS 2, as it meets the definition of a cash-settled sh
based payment transaction. Entity D will be acquiring goods in exchange for a payment, th
amount of which will be based on the value of its shares.
If, however, Entity D has a practice of settling these contracts net, or did not intend to tak
physical delivery, then the forward contract would be within the scope of IAS 32 and IFRS
outside the scope of IFRS 2.
Grant date
It is the date at which the entity and other party agree to the share-based payment arrang
Case #1 - Counterparty is an employee

If the agreement is subject to approval, then the final/ultimate authority approval date be
Both parties should agree and a legally binding agreement should be established between
Case #2 - Counterparty is other than employee

Grant date is the date of receipt of goods or rendering/receiving of services
Grant date Vesting conditions Vesting date
Vesting conditions
These are the conditions that must be satisfied by the other party to become entitled to r
the share-based payment
Vesting period
The period during which the vesting conditions are to be satisfied.
Vesting date
The date on which all vesting conditions have been met
and the employee/ 3rd party becomes
entitled to the share-based payment
Exercise date
Wo date jiss din employee/ 3rd party apnay earned right to receive ko exercise karay gaa
There are 3 types of vesting conditions :

i.Service condition
ii.Non-market performance condition
iii.Market condition
i.Service condition
The employee completing a minimum period of service
ii.Performance condition
*Achievement of minimum sales or earnings target
*Achievement of a specific increase in profit or earnings per share
*Successful completion of a flotation
*Completion of a particular project
iii.Market condition
Market-based performance or vesting conditions are conditions linked to the market price
the shares in some way. Examples include vesting dependent on achieving:
*A minimum increase in the share price of the entity
*A minimum increase in shareholder return
*A specified target share price relative to an index of market prices
Direct and indirect measurement
Case #1 - Counterparty is other than employee
Direct measurement
For equity‑settled share‑based payment transactions, the entity shall
measure the goods or services received, and the corresponding increase in
equity, directly, at the fair value of the goods or services received.
Goods (FV of goods/services received)

Equity
Indirect measurement
If the entity cannot estimate
reliably the fair value of the goods or services received, the entity shall
measure their value, and the corresponding increase in equity, indirectly,
by reference to the fair value of the equity instruments granted/given.
Goods (FV of goods/services given)
Equity
Case #2 - Counter party is an employee
Indirect measurement only

The entity shall measure the fair value of the
services received by reference to the fair value of the equity instruments
granted, because typically it is not possible to estimate reliably the fair value
of the services received. The fair value of those
equity instruments shall be measured at grant date.
Salary expense xxx

Equity xxx
Equity credited shall be a separate reserve. However, it is not forbidden to credit Retained
earnings directly instead of creating a separate reserve.
Note!
The definition of employee is to be considered as per law only in IFRS 02
Transaction with third parties (Not employees)
Question #1 - ARM Handout Transaction with third party

Q.Entity A has been paying Entity B, a corporate finance consultancy, in cash at the rate of
per hour for advance. Entity B is proposing to increase its fees by 5% per annum. Entity A is
experiencing cash flow pressures, so it has persuaded Entity B to accept payment in the for
shares with effect from 1 July 20X5. The initial arrangement is for two years with Entity A
agreeing to issue 6,000 of its shares to Entity B every six months in exchange for Entity B
providing 300 hours of advice evenly over the 6-month period.
Required :
What is the expense in profit or loss and the corresponding increase in equity?
Solution :
Months/Yr Rate/hr Hours # of shares Total consideration

31-Dec-05 630 300 6,000 189,000
30-Jun-06 630 300 6,000 189,000
31-Dec-06 662 300 6,000 198,450
30-Jun-07 662 300 6,000 198,450
Equity-settled share-based payment (Transaction with employee)
Vesting period exists

Where entitlement to the instruments granted is conditional on vesting conditions, and th
are to be met over a specified vesting period, the expense is spread over the vesting perio
Service condition
*Illustration Basic question on service condition

Q.500 employees
Reward is 1200 shares
Vesting condition is 3 years of service
At grant date i.e at year 0, fair value of 1 share is Rs.92
Yr Fair value Expected departure
0 92 100
1 96 (20 + 80)
2 105 (20 + 40 + 50)
3 129 (20 + 40 + 40)
Note!
Once equity issued or committed to be issued,
it will never ever be adjusted in the future for any fair value change
Solution :
Yr Instrument FV Time Cumm exp

1 480,000 92 0.33 14,720,000
2 468,000 92 0.67 28,704,000
3 480,000 92 1.00 44,160,000
Note!
Remaining actual employees mai sai furthur expected departure less karkay expense recor
Hum expense ko over the period record kartay hain as per the matching concept
Yr 0
No entry
This is because, employees nai abhi tak company ko koi service provide nahi ki hai
Yr 1
Remuneration expense 14,720,000
Equtiy/Share-based payment reserve
Yr 2
Yr 3
On issuance of shares :
Equity/Share-based payment reserve 44,160,000

Share capital
Share premium
Question #3 - ARM Handout Basic question on service con

Q.Polka Limited has an employee base of 1,800. The company is introducing a share rewar
whereby each employee will be given 500 shares of the company if they stay employed for
from the 1 Jan 2016. Fair value per share on 1 Jan 2016 (Grant date = Agreement date) is R
Expected and actual departure of employees over the three-year period:
Yr Emp left Furth expec Total
1-Jan-16 0 100 100
31-Dec-16 50 70 120
31-Dec-17 110 30 140
31-Dec-18 150 0 150
Track of fair values per share over three-year period:
Date Fair value
1-Jan-16 60
31-Dec-16 70
31-Dec-17 75
31-Dec-18 78
Required
Journal entries for recording the remuneration expense for all three years.
Solution :

1 840,000 60 0.33 16,800,000
2 830,000 60 0.67 33,200,000
3 825,000 60 1.00 49,500,000
Yr 0
No entry
Yr 1
Yr 2
Yr 3
Equity/Share-based payment reserve 49,500,000

Share capital
Share premium
Question #2 - ARM Handout Service condition - Immediate

Q.An entity issues 10 share options to each of its employees on 1 July 20X5. The share opti
vest immediately and there is a two-year period over which the employees may exercise th
share options. Employees are entitled to exercise the options regardless of whether or not
remain in the entity's employment during the period of exercise. The fair value of the shar
options is Rs. 10 on grant date and there are 1,500 employees in the entity's employment
July 20X5.
Required:
How should the transaction be accounted for?
Solution :
Immediate vesting
Where the instruments granted vest immediately, i.e. the recipient party becomes entitled
them immediately, then the transaction is accounted for in full on the grant date.
That means, hum nai table prepare nahi karna hai to spread the remuneration expense ov
Hum nai aik saath remuneration expense book karlay naa hai on the grant date
G.D
Remuneration expense 150,000

Q.On 1 January 2011 an entity grants 100 share options to each of its 400 employees. Each
conditional upon the employee working for the entity until 31 December 2013. The fair val
share option at the grant date is Rs 20.
During 2011 20 employees leave and the entity estimates that a total of 20% of the employ
leave during the three-year period.
During 2012 a further 25 employees leave and the entity now estimates that 25% of its em
leave during the three-year period.
During 2013 a further 10 employees leave.
Requirement
Calculate the remuneration expense that will be recognized in respect of the share-based p
transaction for each of the three years ended 31 December 2013.
Solution :

1-Jan-11 0 0
31-Dec-11 20 60 80
31-Dec-12 45 55 100
31-Dec-13 55 0 55

1 32,000 20 0.33 213,333
2 30,000 20 0.67 400,000
3 34,500 20 1.00 690,000

Q.An entity grants 100 share options to each of its 500 employees. Each grant is conditiona
employee working for the entity over the next three years. The entity estimates that the f
each share option is Rs 15.
During year 1, 20 employees leave. The entity revises its estimate of total employee depar
three-year period from 20 per cent (100 employees) to 15 per cent (75 employees).
During year 2, a further 22 employees leave. The entity revises its estimate of total employ
departures over the three-year period from 15 per cent to 12 per cent (60 employees).
During year 3, a further 15 employees leave. Hence, a total of 57 employees forfeited their
share options during the three-year period, and a total of 44,300 share options (443 emplo
options per employee) vested at the end of year 3.
Required :
Expense over entire period.
Solution :
Yr Emp left Furth expec Total Staying

GD 0 0
1 20 55 75 425
2 42 18 60 440
3 57 0 57 443
1 42,500 15 0.33 212,500
2 44,000 15 0.67 440,000
3 44,300 15 1.00 664,500
Yr 0
No entry
Yr 1
Yr 2
Yr 3
Equity/Share-based payment reserve 664,500

Share capital
Share premium
Types of equity instruments
There are 2 types of equity instruments that can be given to employees :

i.Shares
ii.Share options
*Illustration
The company has decided to give share options to employees if they complete 3 years of s
Rs.
Share option price today 70
Exercise price (70)
Intrinsic value 0
Time value for e.g after 3 yrs is 20
Fair value of share option 20
Note!
Share option kai case mai employee exercise price i.e Rs.70 pay karay gaa
lekin shares kai case mai employee ko free mai milaingay
Employee aur company kai saath day 01 par agreement hojaata hai kai
for e.g after 3 years shares ki jo bhi price hogi
company aap ko Rs.70/share daigi
Jo bhi difference hoga in the future wo employee ka gain hoga
Aur agar future gain ki present value calculate karain tou phir that will become the fair valu
Note!
Shares kai case mai grant date par Rs.70 lock karaingay
Share option kai case mai grant date par Rs.20 lock karaingay
Non-market performance condition
*Illustration Basic question on non-market performance co

There are 10 employees
Performance target is average sales to be Rs.10,000,000 in 3 years
Reward is 5000 shares
Yr FV Exp dep Target
GD 75 3 Yes
1 86 2 Yes
2 97 2 No
3 109 1 (actual) Yes (Target met)
Solution :
1 40,000 75 0.33 1,000,000
2 0 75 0.67 0
3 45,000 75 1.00 3,375,000
Yr 1
Yr 2
Equity/share-based payment reserve 1,000,000
Reversal of remuneration expense
Yr 3
Note!
Non-market performance condition mai agar target meet nahi hoga kisi bhi saal mai
tou phir instruments ko zero kardaingay aur original booked expense ko reverse kardainga
Note!
Table mai time ka matlab hai kai aap kitnay saal mai target achieve karlogay
that means agar contract 5 saal ka hai
aur target achieve 4 years mai hojaayega tou phir
hum 4 saal consider karaingay
Variable vesting date

Where the vesting date is variable depending upon non-market based vesting conditions, t
calculation of the amount expensed in profit or loss must be based upon the best estimate
Question #7 - ARM Handout Basic question on non-marke

Q.Mesuri Limited, in its BOD meeting decided to launch an employee award in order to mo
staff to put forth good efforts to increase sales. With a 1,000 employee base, each employe
committed to be awarded 600 shares if the cumulative sales over the 5 years’ period cros
Fair Value per share at the grant (Agreement) date is Rs 20. Fair values at the end of subse
were observed to be 15, 24, 28 and 26. Other relevant details are as under:
Yr Emp left Further left Total left Target status
GD 80 80 Met
1 30 60 90 Met
2 70 15 85 Not be met
3 100 10 110 Met
4 105 105 Met
Required :
Expense over entire period
Solution :

1 546,000 20 0.33 3,640,000
2 0 20 0.67 0
3 534,000 20 0.60 6,408,000
4 537,000 20 1.00 10,740,000
Yr 1
Yr 2
Equity/share-based payment reserve 3,640,000
Yr 3
Yr 4
Question #8 - ARM Handout Basic question on non-marke

On 1 January 2014 an entity granted options over 10,000 of its shares to Sally, one of its se
employees. One of the conditions of the share option scheme was that Sally must work for
for three years. Sally continued to be employed by the entity during 2014, 2015 and 2016.
A second condition for vesting is that the costs for which Sally is responsible should reduce
annum compound over the three-year period. At the date of grant, the fair value of each s
was estimated at Rs 21.
At 31 December 2014 Sally's costs had reduced by 15% and therefore it was estimated tha
performance condition would be achieved.
Due to a particularly tough year of trading for the year ended 31 December 2015 Sally had
reduced costs by 3% and it was thought at that time that she would not meet the cost redu
by 31 December 2016.
At 31 December 2016, the end of the performance period, Sally did meet the overall cost r
target of 10% per annum compound.
Requirement
How should the transaction be recognized?
Solution :

1 10,000 21 0.33 70,000
2 0 21 0.67 0
3 10,000 21 1.00 210,000
Yr 1
Yr 2
Equity/share-based payment reserve 70,000
Yr 1
Question #9 - ARM Handout Non-market performance con

Q.At the beginning of Year 1, Kingsley grants 100 shares each to 500 employees, condition
employees remaining in the entity during the vesting period. The shares will vest at the en
Year 1 if the entity's earnings increase by more than 18%; at the end of Year 2 if the entity'
increase by more than an average of 13% per year over the two-year period; and at the en
the entity's earnings increase by more than an average of 10% per year over the three-yea
The shares have a fair value of Rs 30 per share at the start of Year 1, which equals the shar
grant date. No dividends are expected to be paid over the year period.
By the end of Year 1, the entity's earnings have increased by 14%, and 30 employees have
entity expects that earnings will continue to increase at a similar rate in Year 2, and therefo
that the shares will vest at the end of Year 2. The entity expects, on the basis of a weighted
probability, that a further 30 employees will leave during Year 2, and therefore expects tha
employees will vest in 100 shares at the end of Year 2.
By the end of Year 2, the entity's earnings have increased by only 10% and therefore the sh
vest at the end of Year 2. 28 employees have left during the year. The entity expects that a
employees will leave during Year 3, and that the entity's earnings will increase by more tha
thereby achieving the average of 10% per year.
By the end of Year 3, 23 employees have left and the entity's earnings had increased by 8%
an average increase of 10.64% per year. Therefore 419 employees received 100 shares at t
Year 3.
Requirement
Show the expense and equity figures which will appear in the financial statements in each
Solution :

1 44,000 30 0.50 660,000
2 41,700 30 0.67 834,000
3 41,900 30 1.00 1,257,000
Yr 1
Yr 2
Yr 3
Market condition
*Illustration Discussion on market condition

There are 2 types of shares :
i.Free share
ii.Conditional share
For e.g free share ki fair value hai Rs.120
Conditional share ki fair value kam hoti hai because iss mai conditions attached hoti hain
Conditional share ki fair value mai chance of success and failure incorporated hota hai
Instrument
i.Service condition Adjust i.e = 0
ii.Non-market performance condition Adjust i.e = 0
iii.Market condition Do not adjust
Question #11 - ARM Handout Basic question on market con

Q.Mushfiq Limited has introduced a share-based award for its key management employee
in number. Target for the employees is to grow the share price to a certain level (Market C
Fair value per share at the grand date is Rs 22. Fair value per share after incorporating the
success and failure of achieving the market condition is Rs 18 per share. Other relevant det
Shares are 500/employee
Yr Emp left Further exp Total left Target status
GD 16 16 Will be met
1 8 10 18 Will be met
2 16 6 22 Not be met
3 20 3 23 Will be met
4 25 25 Will/Not be
Required :
Expense over entire period
Solution :

1 41,000 18 0.25 184,500
2 39,000 18 0.50 351,000
3 38,500 18 0.75 519,750
4 37,500 18 1.00 675,000
Yr 1
Yr 2
Yr 3
Yr 4
Case #1 - Condition met

Share capital + Premium
Case #2 - Condition not met

Retained earnings
Note!
Hamesha service condition employees ko meet karni hi hogi plus performance or market c
The employees must stay to earn the share-based payment award warna instruments ko z
Question #12 - ARM Handout Vesting conditions not met - M

Q.On 1 January 2014 an entity granted options over 10,000 of its shares to Jeremy, one of
employees. One of the conditions of the share option scheme was that Jeremy must work
for three years. Jeremy continued to be employed by the entity during 2014, 2015 and 201
condition for vesting is that the share price increases at 25% per annum compound over th
period. At the date of grant the fair value of each share option was estimated at Rs 18 taki
account the estimated probability that the necessary share price growth would be achieve
During the year ended 31 December 2014 the share price rose by 30% and by 26% per ann
compound over the two years to 31 December 2015. For the three years to 31 December 2
increase was 24% per annum compound.
Required :
How should the transaction be recognised?
Solution :

1 10,000 18 0.33 60,000
2 10,000 18 0.67 120,000
3 10,000 18 1.00 180,000
Yr 1
Yr 2
Yr 3

Retained earnings
Question #13 - ARM Handout Vesting conditions not met

Q.X Limited is a company with a 31 December year end. X Limited grants 10,000 share opti
its 10 directors on condition that they remain with the company over a 3-year vesting perio
share price increases by 10% per annum over that period.
At the grant date the fair value of each share option (taking account of the probability of a
share price increase) is Rs. 40.
Early in year 1, X Limited's profitability was adversely affected by a fall in world oil price ma
extremely unlikely that the share price condition will be met. This has no impact on the rec
the expense which proceeds as follows:
31 December Year 1: 9 directors are expected to be with the company at the end of the ve
31 December Year 2: 9 directors are expected to be with the company at the end of the ve
31 December Year 3: 8 directors are still employed by the company. The share price conditi
Required :
Solution :

1 90,000 40 0.33 1,200,000
2 90,000 40 0.67 2,400,000
3 80,000 40 1.00 3,200,000
*Illustration Actual vesting period > Expected vesting perio

Case #1 - Market condition
Market condition kai case mai day 01 ka vesting period lock kartay hain aur expense ko uss
Abb,
for example target period is 10 years aur expected vesting period is 5 years
abb expense ko 5 years mai spread karna hai aur wait karna hai
after 5 years kab target achieve hoga
agar nahi hota tou phir uss expense ko reverse karaingay
Case #2 - Non-market performance condition
Non-market kai case mai vesting period vary karta hai
aur jab target achieve nahi hota hai tou hum immediately expense ko reverse kardaitay ha
Expense reversal entry is,

Share-based payment reserve
Retained earnings
Question #13 - ARM Handout Vesting conditions not met

Q.At the beginning of year 1, an entity grants 10,000 share options with a ten-year life to e
senior executives. The share options will vest and become exercisable immediately if and w
entity’s share price increases from CU50 to CU70, [i.e. this vesting condition is a market co
which the length of the vesting period varies] provided that the executive remains in servic
share price target is achieved. [i.e. this vesting condition is a service condition—service con
not market conditions]
The entity applies a binomial option pricing model, which takes into account the possibility
share price target will be achieved during the ten-year life of the options, and the possibilit
target will not be achieved. The entity estimates that the fair value of the share options at
CU25 per option. From the option pricing model, the entity determines that the mode of th
distribution of possible vesting dates is five years. In other words, of all the possible outco
likely outcome of the market condition is that the share price target will be achieved at the
5. Therefore, the entity estimates that the expected vesting period is five years. The entit
estimates that two executives will have left by the end of year 5, and therefore expects tha
share options (10,000 share options × 8 executives) will vest at the end of year 5.
Throughout years 1–4, the entity continues to estimate that a total of two executives will l
end of year 5. However, in total three executives leave, one in each of years 3, 4 and 5. The
target is achieved at the end of year 6. Another executive leaves during year 6, before the
target is achieved.
Required:
Solution :

1 80,000 25 0.20 400,000
2 80,000 25 0.40 800,000
3 80,000 25 0.60 1,200,000
4 80,000 25 0.80 1,600,000
5 70,000 25 1.00 1,750,000
Yr 1 - 4
Yr 5
Yr 6
Equtiy/Share-based payment reserve 250,000
Retained earnings
Equtiy/Share-based payment reserve 1,500,000

Note!
If non-market and market condition are given in the same question,
tou phir market-condition kai time at grant date ko lock kardaingay aur non-market kai tim
and will consider the time whichever is higher because ultimately saari conditions ko mee
Question #16 - ARM Handout Multiple vesting conditions

Shams Limited has appointed Faisal as the new CEO of the company. While deciding his rem
the company offered 1,000,000 shares of the company if the following conditions are met:
EPS to increase to a certain level
Market price of the share to increase to a certain level Fair value per share at the grant dat
Fair market value is Rs.210
Fair value adjusted for market condition is Rs.180
Fair value adjusted for non-market condition is Rs.190
Fair value adjusted for market and non-market condition is Rs.155
Other information :
Yr VP for non-m VP for mkt
GD 3 4
1 5 5
2 5 5
3 4 5
4 5 5
5 6 6
Solution :

1 1,000,000 180 0.20 36,000,000
2 1,000,000 180 0.40 72,000,000
3 1,000,000 180 0.75 135,000,000
4 1,000,000 180 0.80 144,000,000
5 1,000,000 180 0.83 150,000,000
Case #1 - Both conditions are met

6 1,000,000 180 1.00 180,000,000
Case #2 - Both conditions not met

6 0 180 1.00 0
Case #3 - Non-mkt condition met but not market condition

6 1,000,000 180 1.00 180,000,000
Case #4 - Mkt condition met but not non-market condition

6 0 180 1.00 0
Question #23 - ARM Handout Winter 2017 Q.6b

Q.On 1 July 2016, Ravi Limited (RL) offered 1000 share options to each of its 500 employee
The offer is conditional upon completion of five years' service from the date the offer was
The award of options would depend upon attainment of the following additional condition
Condition #1 - Average sales for the next 5 years is Rs.300 million or more.
Condition #2 - At the end of the 5th year, share price of the company exceeds Rs.200 per s
Market values of the options at grant date were estimated as under :
Without taking into account any of the two conditions
Taking into account only condition 1
Taking into account only condition 2
Taking into account both the conditions
Following information is available at year end is :
i.Sales for the year ended 30 June 2017 was Rs.210 million however it was estimated that s
ii.The share price was Rs.160 per share
iii.It was estimated that 15% of the employees would leave the company before completio
Required :
Discuss how this transaction should be recorded in RL's books of accounts for the year end
Solution :
Yr Sales Avg sales

1 210
2 252
3 302
4 363
5 435
1,563 312.55 Non-market condition is met

30-Jun-17 425,000 38 0.20 3,230,000
Question - ARM
Q.There are 10 employees
Award is 500 shares for each employee
Target is market condition
FV adjusted is Rs.80/share
Yr Exp dep Exp VP
GD 20% 4
1 30% 5
2 20% 5
3 20% 5
4 10% 4
Solution :

1 3,500 80 0.25 70,000
2 4,000 80 0.50 160,000
3 4,000 80 0.75 240,000
4 4,500 80 1.00 360,000
Note!
Expected vesting period < Actual vesting period
Hum expense ko expected vesting period tak hi spread karaingay i.e KPMG View
Question - ARM
Shares per employee is 100
Adjusted fair value is Rs.45/share
Expected vesting period is 3 years
Actual vesting period is 2 years
No departures expected
No actual departures took place
Solution :

1 1,000 45 0.33 15,000
2 1,000 45 0.67 30,000
3 1,000 45 1.00 45,000
Yr 1
Yr 2
Equity/Share-based payment reserve 30,000
Share capital + premium
Yr 3
Question #17 - ARM Handout Multiple conditions (Market a

Q.Company B issued 100 share options to certain employees,
that will vest once revenues reach Rs.1 billion and its share price reaches Rs.50/share
The employee will have to be employed with company B at the time the share options vest
The share option had a fair value of Rs.20 at the grant date and will expire in 10 years.
Requirement
How should the expense be recorded under each of the following different scenarios?
i.All options vest
ii.Revenues have reached Rs.1 billion, all employees are still employed and the share price
iii.The share price has reached Rs.50, all employees are still employed but revenues have n
iv.Revenues have reached Rs.1 billion, the share price has reached Rs.50 and half of the em
left the company prior to the vesting date.
Solution :
i.100% expense should be recorded (All conditions met)

ii.100% expense should be recorded (Market condition not met)
iii.0% expense should be recorded (Non-market condition not met)
iv.50% expense should be recorded (All conditions met but half of the employees currently
Awards issued during the year

Where the grant date arises mid-year, the calculation of the amount charged to profit or lo
must be pro-rated to reflect that fact.
Question #18 - ARM Handout Service condition - Time is mo

Q.Yarex Plc is proposing to award share options to directors and senior employees during t
The proposal is to issue 100,000 options to each of the 50 directors and senior managers o
The exercise price of the options would be Rs.5/share
The scheme participants will need to have been with the company for at least 3 years befo
It is estimated that 75% of the current directors and senior managers will remain with the
1-Nov-06
Price per option 5
Fair value of each option 2
Requirement
Show how the proposed scheme would be reflected in the financial statements on 31 Dec
Solution :

1 3,750,000 2 0.06 416,667
2 3,750,000 2 0.39 2,916,667
Cash-settled share-based payment transactions
Cash-settled share-based payment transactions

The entity receives goods or services in exchange for amounts of cash that are based on th
price (or fair value) of the entity’s shares or other equity instruments of the entity.
Company
Goods/Services
Cash
Amount depend on the fair value of share

of company or any group company
(Group does not include associates whether direct or indirect)
Note!
i.Since the company has to settle the obligation by paying cash, it is a liability and not equi
ii.The liability's value is dependent on the value of shares so as the FV of shares change, th
iii.GD FV will not be locked. The amount payable to an employee is the FV of shares at vesti
Cash based award

Phantom shares
Phantom shares
Phantom shares
It is like normal shares given to any employee
Yeh shares redeemable hotay hain therefore it is a liability for the company
Inn par dividend bhi milta hai
Yeh redeem sirf company kai paas hosaktay hain and not in the stock market
Inn shares par voting right nahi milta hai
Service condition
*Illustration Basic concept of phantom shares

Service condition is 3 years
Award is 1200 phantom shares per employee
Yr Exp dep FV
GD 2 25
1 1 29
2 2 31
3 1 35
Solution :
Note!
Liability ko hamesha latest fair value par remeasure karna hota hai
Therefore in service condition unlike in equity-settled share based payment transaction
hum fair value of grant date lock nahi karaingay

1 10,800 29 0.33 104,400
2 9,600 31 0.67 198,400
3 10,800 35 1.00 378,000
Yr 1
Financial liability
Yr 2
Financial liability
Yr 3
Financial liability
Case #1 - Mandatorily encashed
Financial liability 378,000

Bank 378,000
Case #2 - Convertible at employee option lekin uss nai year 4 par encash karaaya hai
Abb hum nai table ko continue karna paray gaa
because liability will always be remeasured at latest fair value
4 10,800 40 1.00 432,000
P/L 54,000

Bank 432,000
*Illustration Basic concept of phantom shares (Outstanding

3 years service condition
Award is 500 phantom shares
Yr Actual dep Further exp Total Staying
GD 0 20 20 80
1 5 18 23 77
2 12 10 22 78
3 16 16 84
4 0 100
5 0 100
25 employees encashed phantom shares at year 3 end
50 employees encashed phantom shares at year 4 end
Remaining employees encashed phantom shares at year 5
Solution :
Outstanding liability table

Yr Instrument FV Time Liability
1 38,500 40 0.33 513,333
2 39,000 42 0.67 1,092,000
3 29,500 45 1.00 1,327,500
4 4,500 50 1.00 225,000
5 35 1.00 0
Yr 1
Financial liability
Yr 2
Financial liability
Yr 3
Financial liability
Remuneration expense (25*500*45) 562,500

Bank
Yr 4
Financial liability 1,102,500
Remuneration expense
Remuneration expense (50*500*50) 1,250,000
Bank
Yr 5

Bank
Share appreciation rights (SARs)
*Illustration Basic concept of share appreciation rights (SAR

Q. GD 1 2
Fair value 50 60 65
Exercise price (50) (50) (50)
Intrinsic value 0 10 15
Time value 12 7 5
Fair value 12 17 20
There is an agreement between the employee and the company

The agreement is kai aap 3 years serve karo
Hum aap ko Rs.50 ka share appreciation right dairahay hain
Over and above aap ki earning hogi lekin aap ko Rs.50 pay karnay paraingay
Yeh right aap 3 years serve karnay kai baad hi exercise karsakogay
Note!
Hum intrinsic value i.e actual plus expected i.e time value ko consider karkay expense book
Fair value = Intrinsic value + Time value

1 1 17 0.33 5.67
2 1 20 0.67 13.33
3 1 25 1.00 25.00
4 1 30 1.00 30
5 0 30 1.00 0
Yr 1
Remuneration expense 5.67
Financial liability
Yr 2
Financial liability
Yr 3
Financial liability
Yr 4
Remuneration expense 5
Financial liability
Year 5 kai day 01 par employee nai SARs exercise karnay ko kaha to the company
Yr 5 day 01
Financial liability 30
Remuneration expense 28
Bank
Note!
SARs mai payment sirf intrinsic value par hoti hai
Question #25 - ARM Handout Service condition - Share app

Q.On 1 January 2001, an entity grants 100 cash share appreciation rights (SARs) to each of
on condition that the employees continue to work for the entity untill 31 December 2003.
During 2001, 35 employees leave. The entity estimates that a further 60 will leave during 2
During 2002, 40 employees leave and the entity estimates that a further 25 will leave durin
During 2003, 22 employees leave.
At 31 December 2003, 150 employees exercise their SARs.
Another 140 employees exercise their SARs at 31 December 2004 and the remaining
113 employees exercise their SARs at the end of 2005.
The fair value of the SARs for each year in which a liability exists are shown below, togethe
at the dates of exercise :
Fair value Intrinsic value
Rs. Rs.
2001 14.4
2002 15.5
2003 18.2 15
2004 21.4 20
2005 25
Requirement :
Calculate the amount to be recognized in profit or loss for each of the 5 years ended 31 de
to be recognized in the statement of financial position at 31 December for each of the 5 ye
Solution :

1 40,500 14.4 0.33 194,400
2 40,000 15.5 0.67 413,333
3 25,300 18.2 1.00 460,460
4 11,300 21.4 1.00 241,820
5 0 1.00 0
Yr 1
Financial liability
Yr 2
Financial liability
Yr 3
Financial liability

Bank
Yr 4

Bank
Yr 5

Bank
Non-market performance condition
Question - ARM Cash-settled (Phantom shares) - Non-market p

Q.Employee base is 1000
Target is EPS to be increased to a certain level
Expectation is award 100 phantom shares per employee
Yr Total exp de FV Exp vest per
GD 150 70 3
1 160 80 3
2 170 89 n/a
3 150 92 4
4 175 95 Target met
Solution :

1 84,000 80 0.33 2,240,000
2 0 89 0.67 0
3 85,000 92 0.75 5,865,000
4 82,500 95 1.00 7,837,500
Yr 1
Financial liability
Yr 2
Yr 3
Financial liability
Yr 4
Financial liability
Note!
Difference between service and non-market condition
i.e vesting period change hota jaayega in non-market condition
employees ko zero in service condition if all employees left aur instrument ko zero kardain
Market condition
Question - ARM Cash-settled (Phantom shares) - Market condi

Target is market value to be increased to Rs.85/share
Reward is 500 phantom shares per employee
Yr Exp dep FV Adj FV Exp VP
GD 2 75 70 4
1 2 82 4
2 2 84 4
3 2 82 4
4 2 88 4
Solution :
Note!
IFRS 02 kehta hai cash-settled market condition kai case mai
jiss saal fair value target sai equal ya ziaada hogi, uss saal adjusted fair value bhi same hogi
since the target has not been achieved.
Yr Exp dep FV Adj FV Exp VP

GD 2 75 70 4
1 2 82 0 4
2 2 84 0 4
3 2 82 0 4
4 2 88 88 4

1 4,000 0 0.33 0
2 4,000 0 0.67 0
3 4,000 0 0.75 0
4 4,000 88 1.00 352,000
Question #28 - ARM Handout Cash-settled (Market conditio

Q.ZZX Limited has provided a share incentive scheme to a number of its employees on 1 Ja
This allows for a cash payment to be made to the individuals concerned equal to the share
at the end of a 3-year period subject to the following conditions :
i.Vesting will be after 3 years
ii.The share price must exceed by Rs.2
iii.The employee must be with the company on 31 Dec 2006.
Each scheme issued will result in payment, subject to the conditions outlined, equal to the
of 10 shares at the end of the 3 year period if the conditions are satisfied.
The payments, once earned, are irrevocable.
The finance director has been issued 20 such schemes.
The share priices over the next 3 years were as follows :
31-Dec-04 2.2
31-Dec-05 1.8
31-Dec-06 2.4
Requirements :
i.Prepare journal entries for the transactions of the share incentives issued to the finance d
Solution :
Yr FV Adj FV Exp VP
GD 2 2 3
1 2.2 2.2 3
2 1.8 0 3
3 2.4 2.4 3

1 10 2.2 0.33 7.33
2 10 0 0.67 0
3 10 2.4 0.75 18
Choice of settlement
Case #1 - Option rests with the counterparty
Option rests with counterparty

Where the counterparty or recipient, rather than the issuing entity has the right to choose
form settlement will take, IFRS 2 regards the transaction as a compound financial instrume
which split accounting must be applied.
Direct measurement
For transactions in which the fair value of goods or services is measured directly (that is
normally where the recipient is not an employee of the company), the fair value of the equ
component is measured as the difference between the fair value of the goods or services
required and the fair value of the debt component.
*Illustration Option rests with the counterparty (Direct me

Q.Land is purchased amounting to Rs.800,000
A choice has been given to the counterparty
i.e
i.30,000 shares having a fair value per share is Rs.20
ii.Cash amounting to Rs.30,000 jiss ki value base karrahi hai on the fair value of share amou
Solution :
Day 01 par hum nai total consideration to be paid mai sai fair value of liability ko less karna
Rs.
Land 800,000
Less : FV of liability (600,000)
Premium paid for share option 200,000
Day 01
Land 800,000
Financial liability
Abb financial liability remeasure hoti rahay gi for fair value gain/loss
lekin equity remeasure nahi hogi
because equity once issued or committed to be issued will never be adjusted for any fair va
At year end, fair value has gone to Rs.22
Yr 1
P/L 60,000
Case #1 - Settled in cash

Bank 660,000
Share-based payment reserve 200,000

Retained earnings
Case #2 - Settled in shares


Retained earnings
Question #31 - ARM Handout Choice with the counterparty

Q.Company ABC acquired a vehicle from Jammers Limited having a fair value of Rs 500,000
1, 2003. The payment for the acquisition will be made in either of the following modes in 1
(ignore the time value factor accruing due to deferred credit terms):
Ordinary shares 42,000 shares
Cash equal to the value of 40,000 shares
Fair values at different dates:
Date Fair value
Jan 1 2003 (GD) 12
June 30 2003 (Yr end) 15
Dec 31 2003 (Settlement date) 13
Settlement option rests with Counter party
Account for the above transaction as ultimately:
i.Settled in cash
ii.Settled in equity
Solution :
Rs.
Vehicle 500,000
Premium paid for share option 20,000
1-Jan-03
Vehicle 500,000
Financial liability
At 30 june, fair value has gone up to Rs.15
30-Jun-03
P/L 120,000
31-Dec-03
P/L 80,000

Bank 520,000

Retained earnings


Retained earnings
OR
Share-based-payment reserve 20,000

Q.Company XYZ acquired a piece of land from Crammers Limited having a fair value of Rs 8
on Jan 1, 2006. The payment for the acquisition will be made in either of the following mod
1 year (ignore the time value factor accruing due to deferred credit terms):
Ordinary shares
48,000 shares
Date Fair value
Jan 1 2006 (GD) 20
June 30 2006 (Yr end) 22
i.Settled in cash
Solution :
Rs.
Land 800,000
Less : FV of liability (1,000,000)
Expense on cash-settled SBP trans (200,000)
1-Jan-06
Vehicle 800,000
Expense 200,000
Financial liability
30-Jun-06
Expense 100,000
31-Dec-06
Expense 150,000

Bank 1,250,000

Share capital 480,000
Share premium 770,000
Note!
Jitnay bhi cash bhi shares issue hotay hain ussi amount par record kartay hain
zaroori nahi kai shares ko fair value par hi issue kiya jaaye
Shares ko revalue bhi nahi kartay hain
Cash received sai ziada share capital aur premium record nahi hosakta hai

ARM Limited obtained consultancy services from dreamers Limited having a fair value of R
1,200,000 on Jan 1, 2009. The payment for the acquisition will be made in either of the
following modes in 1 year (ignore the time value factor accruing due to deferred credit term
Ordinary shares are 60,000 shares
Date Fair value
Jan 1 2009 (GD) 21
June 30 2009 (Yr end) 23
i.Settled in cash
Solution :
Rs.
Consultancy services 1,200,000
1-Jan-06
Consultancy services 1,200,000
Financial liability
Case #2 - Option rests with the employee
Indirect measurement
For other transactions including those with employees where the fair value of the goods o
services is measured indirectly by reference to the fair value of the equity instruments gr
the fair value of the compound instrument is estimated as a whole.
The debt and equity components must then be valued separately. Normally transactions a
structured in such a way that the fair value of each alternative settlement is the same.
Question #33 - ARM Handout Choice with the employee

Q.On 1 January 20X4 an entity grants an employee a right under which she can, if she is sti
employed on 31 December 20X6, elect to receive either 8,000 shares or cash to the value,
that date, of 7,000 shares.
The market price of the entity’s shares is £21 at the date of grant, £27 at the end of 20X4, £
at the end of 20X5 and £42 at the end of 20X6, at which time the employee elects to receiv
shares. The entity estimates the fair value of the share route to be £19.
Requirement
Show the accounting treatment.
Solution :
Note!
Transactions with employees jiss mai employee ko choice of settlement given ho tou phir
hum fair value of service indirect measurement sai estimate kartay hain
i.e at fair value of equity instruments given
lekin iss case mai
the fair value of service will be the higher of fair value of equity or fair value of liability
Cash route
Rs.
Shares 7,000
FV at grant date 21
Fair value of liability 147,000
Shares route
Rs.
Shares 8,000
Adjusted fair value 19
Fair value of equity 152,000
Note!
Adjusted fair value in share route mai consider karaingay because
wo fair value adjusted hogi for chances of success and failure
of kai kitna chance hai kai employee cash ko surrender karkay shares ko opt karay gaa
Fair value of service is Rs.152,000 i.e cash route or share route whichever is higher.
Rs.
Fair value of service 152,000

1 7,000 27 0.33 63,000
2 7,000 33 0.67 154,000
3 7,000 42 1.00 294,000
Equity table
Yr Instrument Time CE PE
1 5,000 0.33 1,667 1,667
2 5,000 0.67 3,333 1,667
3 5,000 1.00 5,000 1,667
31-Dec-04
Remuneartion expense 64,667
Financial liability
31-Dec-05
Financial liability
31-Dec-06
Financial liability

Bank

Retained earnings


Retained earnings
Treatment of non-vesting conditions
Non-vesting conditions
i.e vesting conditions kai baad ka period jiss mai
nothing to be performed by employee i.e services to company
Abb IFRS 02 kehta hai kai adjusted fair value aap 3 situations mai use karogay :
i.Market condition
ii.Jab employee kai paas choice of settlement ho aur wo share route consider karay instead
iii.Non-vesting condition kai case mai i.e
For e.g employee kai ooper restriction lag gaye kai aap ko 3 saal i.e service condition kai ba
lekin aap uss ko for the next 2 years tak sell nahi karsako gay
therefore hum uss share ki adjusted fair value ko use karkay expense record karaingay
Question #34 - ARM Handout Choice with the employee

Q.An entity grants to an employee the right to choose either 1,000 phantom shares
i.e a right to a cash payment equal to the value of 1,000 shares, or 1,200 shares
The grant is conditional upon the completion of 3 years' service.
If the employee chooses the share alternative, the shares must be held for 3 years after ve
At grant date, the entity's share price is Rs.50/share
At the end of years 1, 2 and 3, the share price is 52, 55 and 60 respectively.
The entity does not expect to pay dividends in the next 3 years.
After taking into account the effects of the post-vesting transfer restrictions, the entity
estimates that the grant date fair value of the share alternative is Rs.48/share
At the end of year 3, the employee chooses :
i.The cash alternative
ii.The equity alternative
Requirement
Journalize the above transaction
Solution :
Cash route
Rs.
Shares 1,000
FV at grant date 50
Fair value of liability 50,000
Shares route
Rs.
Shares 1,200
Rs.
Fair value of service 57,600

1 1,000 52 0.33 17,333
2 1,000 55 0.67 36,667
3 1,000 60 1.00 60,000
Equity table
Yr FV of eq (GD) Time CE PE
1 7,600 0.33 2,533 2,533
2 7,600 0.67 5,067 2,533
3 7,600 1.00 7,600 2,533
31-Dec-04
Financial liability
31-Dec-05
Financial liability
31-Dec-06
Financial liability

Bank

Retained earnings


Retained earnings
Question #38 - ARM Handout Winter 2009 Q.3

Solution :
Cash route
Rs.
Shares 64,000
FV at grant date 125
Fair value of liability 8,000,000
Shares route
Rs.
Shares 80,000
Fair value of equity 8,800,000
Rs.
Fair value of service 8,800,000

1 64,000 130 0.33 2,773,333
2 64,000 138 0.67 5,888,000
3 64,000 150 1.00 9,600,000
Equity table
1 800,000 0.33 266,667 266,667
2 800,000 0.67 533,333 266,667
3 800,000 1.00 800,000 266,667
30-Jun-10
Remuneartion expense 3,040,000
Financial liability
30-Jun-11
Financial liability
30-Jun-12
Financial liability
Option 1 - Settled in cash

Bank

Retained earnings


Retained earnings
Question #36 - ARM Handout June 2015 Q.3b

Solution :
Cash route
Rs.
Shares 80,000
FV at grant date 145
Shares route
Rs.
Shares 100,000
Rs.
Fair value of service 13,500,000

1 80,000 150 0.33 4,000,000
2 80,000 156 0.67 8,320,000
3 80,000 165 1.00 13,200,000
Equity table
1 1,900,000 0.33 633,333 633,333
2 1,900,000 0.67 1,266,667 633,333
3 1,900,000 1.00 1,900,000 633,333
30-Jun-10
Financial liability
30-Jun-11
Financial liability
30-Jun-12
Financial liability
Option 1 - Settled in cash

Bank
Share-based payment reserve 1,900,000

Retained earnings


Retained earnings
Question #37 - ARM Handout June 2018 Q.6(i)
Solution :
Solution :
Rs.
Land 230,000,000
Expense on cash-settled SBP trans 20,000,000
1-Oct-17
Land 230,000,000
Financial liability
31-Dec-17
P/L 7,000,000
Case #3 - Option rests with the company (SBP provider)
Note!
Agar entity khud kai paas choice ho kai wo shares mai payment karay ya cash mai
tou hamesha company chaahay gi kai wo shares mai payment karay to save
cash i.e main resource hota hai to generate economic benefits
Abb company hamesha shares ki choose karay gi for settlement lekin agar koi present obli
tou phir company ko majbooran cash mai settlement karni paray gi
IFRS 02 nai yeh indicators bataayey hain jiss ki waja sai present obligation arise hosakti hai
i.Legal ban on issuance of shares i.e authorized share capital full hogaya ho
ii.Prohibition of shares issuance by the company i.e because uss sai %age of shareholding c
iii.Past practice
iv.Current statement
Question #41 - ARM Handout Choice is with the company

Q.X limited is a company with a 31 December year end.
1 January Year 1
X limited grants share based compensation to each of its 1,200 employees.
X limited will pay 200 shares or the cash equivalent to the value of 200 shares to any emplo
who satisfies the 3 year service condition.
The fair value of the share at the grant date is Rs.18
The fair values of the shares and the employees who are interested is expected to vest at e
Date Expected shares to be vested
Yr 1 80%
Yr 2 90%
Yr 3 1000 Employees
Required :
Journalize the above treating as cash settled and equity settled.
Solution :
Case #1 - Company has a present obligation (Will be treated as cash settled i.e liability)

1 192,000 17 0.33 1,088,000
2 216,000 16 0.67 2,304,000
3 200,000 15 1.00 3,000,000
Note!
Hum transaction ko equity aur liability mai bi-furcate nahi karaingay
Yr 1
Financial liability
Yr 2
Financial liability
Yr 3
Financial liability
i.Settled in cash

Bank 3,000,000

Share capital 2,000,000
Share premium 1,000,000
Note!
At year end hum
fair value of equity latest aur fair value of liability ko compare karaingay
Agar donu same hoongi tou phir above accounting treatment follow karaingay
warna accounting treatment different hojaayegi
Rs.
Difference -
Case #2 - Company has no present obligation (Will be treated as equity settled)

Abb hum starting sai iss transaction ko equity-settled transaction treat karaingay
Yr Instrument FV Time CE
1 192,000 18 0.33 1,152,000
2 216,000 18 0.67 2,592,000
3 200,000 18 1.00 3,600,000
Yr 1
Yr 2
Yr 3
i.Settled in equity

Share capital
Share premium
ii.Settled in cash
Note!
Transaction ko starting sai liability consider karkay cash ya shares mai payment karna simp
lekin agar transaction ko starting sai equity-settled consider karkay cash mai payment kara
Iss ko hum aisay consider karaingay kai pehlay shares issue kardiyey aur baad mai
shares waapis lay kar cash mai payment kartay hain
i.e buy back of shares ki transaction yeh hogi
Since employees bhi abb shareholders ban gayey hain tou phir
transaction with shareholders mai kabhi bhi P/L hit nahi hota hai

Bank
Retained earnings/Equity
Rs.
Difference -
When FV of both option are different at settlement date
Question #40 - ARM Handout

Q.At grant date :
Equity fair value is Rs.1,200
Cash fair value is Rs.1,000
Entity has a choice and there is no present obligation
Solution :
Entity has choose equity settled
Remunearation expense 1,200

At settlement date :
Case #1 - Settled in shares/equity


Abb company Rs.1,400 equity sai apna kaam karsakti thi lekin wo decide karrahi hai to pay
i.e Rs.100 extra amount
That extra amount is called ex-gratia payment
Iss payment ko immediately P/L mai expense out kartay hain
Expense - P/L 100

Retained earnings 200
Bank

Q.At grant date :
Entity has a choice and there is no present obligation
Solution :
Entity has choose equity settled
Remunearation expense 1,200

At settlement date :
Case #1 - Settled in shares/equity

Expense - P/L 50

Retained earnings 300
Bank
Note!
Retained earnings par hit hamesha tab aayega jab hum buy-back of shares karaingay
IFRS 02 contract/agreement modification
Modification
Agreement between the company and the counterparty i.e an employee ko change/modif
We will consider transaction with employees only
We will consider equity-settled transactions only
Modification
Beneficial to employee
Repricing of option Relaxation
Service condition
Non-market
performance
condition
Note!
Hum wo transactions jo kai beneficial to employees nahi hoongi, unn ki accounting nahi ka
We will account for only those transactions jo kai beneficial hoongi for the employees
#1 : Repricing of option
*Illustration Modification - Repricing of option

Q.Vesting condition is 4 years
Award is 5000 share options
Exercise price is Rs.20/option
GD 1 2
Fair value of share 25 30 18
Time value of money 6 8 2
Fair value of option 11 18 2
Note!
Repricing sirf share options mai hi hosakti hai
Intrinsic value kabhi bhi negative nahi hosakti hai i.e it can be positive or zero
Abb we will make 2 tables and consider modification separately

Separate modification mai time remaining vesting period consider karaingay
Normal table
1 5,000 11 0.25 13,750
2 5,000 11 0.50 27,500
3 5,000 11 0.75 41,250
4 5,000 11 1.00 55,000
Modified table
3 5,000 8 0.50 20,000
4 5,000 8 1.00 40,000
Yr 1
Yr 2
Yr 3
Yr 4

Bank (Exercise price received) 60,000
Share-capital
Share premium

Q.An entity granted 1,000 share options at an exercise price of Rs.50 to each of its 30 key m
The options only vest if the managers were still employed on 31 December 2007.
The fair value of the share options was estimated at Rs.20 and the entity estimated that th
This estimate was confirmed on 31 December 2004.
The entity's share price collapsed early in 2005.
On 1 July 2005, the entity modified the share options scheme by reducing the exercise pric
It is estimated that the fair value of an option was Rs.2 immediately before the price reduc
immediately after.
It retained its estimate that options would vest with 20 managers
Required :
How should the modification be recognized
Solution :
GD 1 2
Intrinsic value (50) (50) 0
Fair value of option 20 (50) 2
Original award
1 20,000 20 0.25 100,000
2 20,000 20 0.50 200,000
3 20,000 20 0.75 300,000
4 20,000 20 1.00 400,000
Extra award
6 Months 20,000 9 0.20 36,000
3 20,000 9 0.60 108,000
4 20,000 9 1.00 180,000
31-Dec-04
31-Dec-05
31-Dec-06
31-Dec-07

Q.At the beginning of Year 1, an entity grants 100 share options to each of its 500 employe
Each grant is conditional upon the employee remaining in service over the next 3 years.
The entity estimates that the fair value of each option is Rs.15
On the basis of weighted average probability, the entity estimates that 100 employees will
and therefore forefeight the rights to the share options.
During the 1st year, 40 employees leave.
By the end of the 1st year, the entity's share price has dropped, and the entity reprices its
The repriced share options vest at the end of Year 3.
The entity estimates that a further 70 employees will leave during Years 2 and 3 and hence
employee departures over the 3 year vesting period is 110 employees.
During year 2, a further 35 employees leave.
The entity estimates that a further 30 employees will leave during Year 3, to bring the tota
employee departures over the 3 year vesting period is 105 employees.
During year 3, a total of 28 employees leave, and hence a total of 103 employees ceased
employment during the vesting period.
For the remaining 397 employees, the share options vested at the end of year 3.
The entity estimates that, at the date of repricing, the fair value of each of the original sha
i.e before taking into account the repricing is Rs.5
and that the fair value of each repriced share option is Rs.8
Required :
What are the amounts that should be recognized in the financial statements for Years 1 to
Solution :

1 40 70 110
2 75 30 105
3 103 0 103
GD 1 2
Exercise price
Intrinsic value
Fair value of option 15 5 8
Original award
1 39,000 15 0.33 195,000
2 39,500 15 0.67 395,000
3 39,700 15 1.00 595,500
Extra award
2 39,500 3 0.50 59,250
3 39,700 3 1.00 119,100
#2 : Vesting period is extended

Q.On 1 Jan 2010, company C grants 1,000 share options to each of its 5 board members, su
service condition. The share option can be exercised at any date in 2014.
The current share price at grant date is Rs.100 and the exercise price is also Rs.100
The grant date fair value of an option is estimated at Rs.20
In 2011, C's share price declines significantly to 40 and the option is deeply out of the mon
In order to re-establish the motivational effect of the share options on the employees, C re
by modifying the exercise price to Rs.40 on 1 Sep 2011.
Simultaneously, the service condition is prolonged to 4 years from the date of modificatio
The fair value of the share option immediately before the modification is Rs. 0.1 and imme
the incremental fair value therefore is Rs. 9.6 per option.
At the date of modification, C estimates that all 5 board members will remain in service ov
and the modified vesting period.
However, one board member leaves in 2013
Solution :
GD 1 2
Fair value of share 100
Time value of money 20
Fair value of option 20 0.1
Original award
1 5,000 20 0.25 25,000
2 5,000 20 0.50 50,000
3 5,000 20 0.75 75,000
4 4,000 20 1.00 80,000
Extra award
1 5,000 9.6 0.08 4,000
2 5,000 9.6 0.33 16,000
3 4,000 9.6 0.58 22,400
4 4,000 9.6 0.83 32,000
5 4,000 9.6 1.00 38,400
Note!
Extra vesting period ko separate award treat karaingay
#3 : Relaxation of market condition
Note!
Agar for e.g adjusted fair value buhut kam hogaye hai aur company nai relaxation provide
in market condition tou phir share ki fair value increase hogi which would be beneficial for
tou phir jitna bhi amount mai difference aayega wo fair value hogi for the extra award tabl

Q.On 1 Jan 2010, company D grants 1,000 shares for no consideration to its CEO subject to
and the share price achieving a target of Rs.120
At grant date, the share price is Rs.100 and the grant date fair value of the equity instrume
consideration of the possibility of not meeting the share price target is Rs.80.
In July 2011, the share price decreases to Rs.70 and the company D now estimates that it i
will be met.
In order to motivate the CEO, the market condition is reduced to share price target of Rs.7
The fair value of equity instrument granted considering the market condition immediately
and immediately after the modification is Rs.56
the incremental fair value is Rs.55/share
Solution :
GD 1 2
Fair value of share 100 70
Time value of money
Fair value of option 20 1
Original award
1 1,000 80 0.50 40,000
2 1,000 80 1.00 80,000
Extra award
1 1,000 55 1.00 55,000
#4 : Additional number of shares
Note!
Extra shares provided will be treated as extra award

On 1 January 2010, company E grants 1,000 shares for no consideration to its CEO, subject
At grant date, the fair value of the shares is Rs.15
In 2010, the share price decreases significantly.
Although E has no obligation to do so under the current share-based payment arrangemen
that such an obligation exists.
On 1 Jan 2011, when the share price is Rs.5
E modifies the share-based payment in order to restore the economic position of the CEO,
E grants an additional 2,000 shares for no consideration, worth 10,000 compensating the C
on the original grant of 1,000 shares
Solution :
Original award
1 1,000 15 0.33 5,000
2 1,000 15 0.67 10,000
3 1,000 15 1.00 15,000
Extra award
1 2,000 5 0.50 5,000
2 2,000 5 1.00 10,000
Summary of modification done so far :

i.Repricing - Extra FV award is the separate award
ii.Market condition relaxation - Increase in FV - Increased fair value is the separate award
iii.Extra shares - Additional # of shares is the separate award
#5 : Relaxation of service condition
Iss modification ko hum prospectively adjust karaingay

i.e 2 tables nahi banaayengay
i.e extra award ka table nahi banay gaa

Q.On 1 January 2010, company F grants 1,000 share options to one of its employees, subje
The grant date fair value of a share option is Rs.10 and the the employee is expected to rem
In the middle of 2012, the service period is reduced to 4 years, the employee remains emp
Solution :
1 1,000 10 0.20 2,000
2 1,000 10 0.40 4,000
3 1,000 10 0.75 7,500
4 1,000 10 1.00 10,000

Company G awards a share-based payment similar to the previous example, but the emplo
Although under the terms and conditions of the arrangement the employee forfeights the
G voluntarily accelerates the vesting date to the end of 2011, so that the employee has me
Solution :
1 1,000 10 0.20 2,000
2 1,000 10 1.00 10,000

and the company achieving a cummulative profit target of Rs.100 million at the end of the
The grant date fair value of a share option is Rs.10
At grant date, the employee is expected to stay employed and the profit target is also expe
However, in 2011 the profit target is no longer is expected to be met.
Therefore, in 2012 H reduced the profit target to an amount of Rs.80 million (a beneficial m
which at the time of modificaton is expected to be met.
At the end of 2013, the revised profit target is also not met.
Solution :
2010 1,000 10 0.25 2,500
2011 0 10 0.50 0
2012 1,000 10 0.75 7,500
2013 0 10 1.00 0
Concept of intrinsic value
*Illustration Concept of intrinsic value

Share option
GD 1
Fair value of share 80 85
Exercise price (50) (50)
Intrinsic value of share option 30 35
Time value 14 6
Fair value of share option 44 41
Note!
Agar grant date par fair value of share option given nahi hai tou phir hum
grant date ki intrinsic value use karaingay lekin uss ko lock nahi karsaktay
hum nai intrinsic value ko har saal change karna hoga

Q.Employee base is 1800
Shares per share option is 100
Vesting condition is 3 years service
Exercise price of the option is Rs.125 per instrument
Date Expected shares to be vested FV of shares (upon which op
GD 75% 140
Yr 1 80% 148
Yr 2 85% 147
Yr 3 1,500 employees 150
Solution :
2010 144,000 23 0.33 1,104,000
2011 153,000 22 0.67 2,244,000
2012 150,000 25 1.00 3,750,000

Required :
Describe the accounting treatment in respect of the above transactions in the
FS of XYZ limited for the year ended 30 June 2016.
Solution :
Marketing manager
2014 40,000 32 0.33 426,667
2015 40,000 32 0.67 853,333
2016 0 32 1.00 0
Back office manager
Original award
1 40,000 30 0.33 400,000
2 40,000 30 0.67 800,000
3 45,000 30 1.00 1,350,000
Extra award
1 45,000 9 1.00 405,000
Solution :
Initially there are 15 members

2 left in 1st two years
Last year mai 1 more has left the company
1 13,000 15 0.33 65,000
2 13,000 15 0.67 130,000
3 12,000 15 1.00 180,000
Yr 1
Yr 2
Yr 3

Retained earnings

The grant date fair value of a share option is Rs.10 and the total grant date fair value is Rs.1
At the beginning of 2012, the following modifications are carried out in a single arrangeme
i.The fair value of the option granted is increased from Rs.7 to Rs.11 by reducing the exerci
ii.The number of equity instruments is reduced from 1,000 to 800
Solution :
Note!
Agar aisa koi case aayega tou phir donu modifications ko combine karkay net karkay dekha
kai overall basis par modification beneficial hai ya nahi
agar beneficial hogi tou account for karaingay warna
sirf uss part ko account for karaingay jo kai beneficial hoga
aur not beneficial part ko ignore karaingay
2010 1,000 10 0.33 3,333
2011 1,000 10 0.67 6,667
2012 1,000 10 1.00 10,000
Rs.
Before modification 7,000
After modification 8,800
Difference i.e beneficial 1,800
Extra award
Yr Extra FV Time CE PE
2012 1,800 1.00 1,800 1,800

Solution :
Analysis :
i.3 years service condition
ii.Market condition i.e increase the share price to Rs.1,500/share
iii.Non-market performance condition i.e increase the annual gross profit
W.1
Combinations
Yr GP GP GP
2014 940 940 940
2015 940 820 820
2016 940 820 1,270
Average 940 860 1,010
Award 4000 Options 0 6000 Options
Original award
2014 156,000 600 0.33 31,200,000
2015 0 600 0.67 0
2016 258,000 600 1.00 154,800,000
Note!
Hum nai remaining employees actual at vesting date i.e year 3 par consider karnay hain
Further employees that are expected to leave ko ignore karaingay
Extra award
2016 246,000 130 0.50 15,990,000
2017 252,000 130 1.00 32,760,000
31-Dec-14
31-Dec-15
Remuneartion expense
31-Dec-16
31-Dec-17

Retained earnings
Note!
Aik employee after the original vesting period has left the company
Therefore, hum uss kai SBPR ko retained earnings mai transfer kardaingay

d Financial Reporting - AAFR (December 2022 Attempt)
IFRS 02 : Share Based Payment
eriod for extra award

et condition
financial position
employees.
2 parties Supplier/Employee
Supplies/Delivers goods/services
2 parties Supplier/Employee
Supplies/Delivers goods/services
ments of the entity (including shares or share options)
ash that are based on the

nts of the entity.
ity instruments.
ray to the entity kai mujhay payment
orm ya phir cash jiss ki value base karrahi ho on the fair value
r IFRS 09 hogi
ue to all shareholders
net in shares or rights to

2 and IFRS 09
RS 02 & IFRS 09
business for cash, at
e commodity is delivered.
do so, nor does it have a past
tion of a cash-settled share-

hange for a payment, the
or did not intend to take
cope of IAS 32 and IFRS 9 and
e-based payment arrangement/agreement
thority approval date becomes the grant date.

be established between them
Vesting date Exercise date
to become entitled to receive
e ko exercise karay gaa

ked to the market price of
xxx
xxx
xxx
xxx
fair value
idden to credit Retained
action with third party

cy, in cash at the rate of Rs. 600
% per annum. Entity A is
ccept payment in the form of
wo years with Entity A
exchange for Entity B
se in equity?
Total consideration
189,000
189,000
198,450
198,450
sting conditions, and these

d over the vesting period.
ce condition
Period exp
14,720,000
13,984,000
15,456,000
ss karkay expense record kartay hain
ching concept
ovide nahi ki hai
14,720,000
13,984,000
15,456,000
4,800,000
39,360,000
question on service condition

troducing a share reward scheme
f they stay employed for three years
e = Agreement date) is Rs 60.
Period exp
16,800,000
16,400,000
16,300,000
ovide nahi ki hai
16,800,000
16,400,000
16,300,000
8,250,000
41,250,000
e condition - Immediate vesting

uly 20X5. The share options
mployees may exercise the
rdless of whether or not they
he fair value of the share
he entity's employment at 1
t party becomes entitled to

the grant date.
muneration expense over the period
he grant date
150,000

its 400 employees. Each grant is
ember 2013. The fair value of each
tal of 20% of the employees will
mates that 25% of its employees will
pect of the share-based payment

Period exp
213,333
186,667
290,000

Each grant is conditional upon the
ntity estimates that the fair value of
of total employee departures over the

(75 employees).
estimate of total employee
ent (60 employees).
mployees forfeited their rights to the
hare options (443 employees × 100
Period exp
212,500
227,500
224,500
ovide nahi ki hai
212,500
227,500
224,500
443,000
221,500
ey complete 3 years of service i.e service condition
will become the fair value of the share option
market performance condition

Period exp
1,000,000
(1,000,000)
3,375,000
1,000,000
1,000,000
3,375,000
a kisi bhi saal mai

se ko reverse kardaingay
karlogay
sed vesting conditions, the

d upon the best estimate of when vesting will occur
question on non-market performance condition

ee award in order to motivate the sales
oyee base, each employee is
the 5 years’ period crosses Rs 1 Billion
lues at the end of subsequent 4 years
Exp vest per
3 yrs
3 yrs
N/A
5 yrs
4 yrs
Period exp
3,640,000
(3,640,000)
6,408,000
4,332,000
3,640,000
3,640,000
6,408,000
4,332,000
question on non-market performance condition (Only 1 employee)

res to Sally, one of its senior
that Sally must work for the entity
g 2014, 2015 and 2016.
sponsible should reduce by 10% per
, the fair value of each share option
ore it was estimated that the
ecember 2015 Sally had only

d not meet the cost reduction target
d meet the overall cost reduction
Period exp
70,000
(70,000)
210,000
70,000
70,000
210,000
market performance condition (Variable vesting date)

0 employees, conditional upon the
hares will vest at the end of
nd of Year 2 if the entity's earnings
ar period; and at the end of Year 3 if
year over the three-year period.
1, which equals the share price at
and 30 employees have left. The

ate in Year 2, and therefore expects
n the basis of a weighted average
nd therefore expects that 440
0% and therefore the shares do not

The entity expects that a further 25
will increase by more than 6%,
ngs had increased by 8%, resulting in

received 100 shares at the end of
ncial statements in each of the three years
Period exp
660,000
174,000
423,000
660,000
174,000
423,000
ons attached hoti hain

corporated hota hai
FV Time
Fixed at grant date Fixed
Fixed at grant date Vary
Adjusted fair value Fixed

of grant date for chance
of success and failure
and expected V.P
question on market condition

management employees which are 100
a certain level (Market Condition).
after incorporating the chances of
hare. Other relevant details are as under :
Exp vest per

4 years
5 years
N/A
5 years
Period exp
184,500
166,500
168,750
155,250
184,500
166,500
168,750
155,250
675,000
675,000
erformance or market condition if any

warna instruments ko zero kardaingay if none has stayed in the company
ng conditions not met - Multiple conditions

hares to Jeremy, one of its senior
that Jeremy must work for the entity
ring 2014, 2015 and 2016. A second
nnum compound over the three-year
estimated at Rs 18 taking into
rowth would be achieved at 25%.
30% and by 26% per annum
years to 31 December 20X6 the
Period exp
60,000
60,000
60,000
60,000
60,000
60,000
180,000
ng conditions not met

grants 10,000 share options to each of
ver a 3-year vesting period and that
nt of the probability of achieving the
fall in world oil price making it

has no impact on the recognition of
any at the end of the vesting period.

any at the end of the vesting period.
y. The share price condition is not met.
Period exp
1,200,000
1,200,000
800,000
Expected vesting period
hain aur expense ko uss period sai beyond nahi lay jaana hota hai
ko reverse kardaitay hain
xxx
ned earnings xxx
ng conditions not met

with a ten-year life to each of ten
ble immediately if and when the
condition is a market condition in
ecutive remains in service until the
e condition—service conditions are
o account the possibility that the

ptions, and the possibility that the
of the share options at grant date is
mines that the mode of the
of all the possible outcomes, the most
et will be achieved at the end of year
d is five years. The entity also
nd therefore expects that 80,000
end of year 5.
l of two executives will leave by the
h of years 3, 4 and 5. The share price
during year 6, before the share price
Period exp
400,000
400,000
400,000
400,000
150,000
400,000
150,000
250,000
1,500,000
y aur non-market kai time sai compare karaingay

saari conditions ko meet karnay kai baad share-based payment karni hogi
ple vesting conditions

y. While deciding his remuneration
wing conditions are met:
er share at the grant date:

Period exp
36,000,000
36,000,000
63,000,000
9,000,000
6,000,000
30,000,000
(150,000,000)
30,000,000
(150,000,000)
r 2017 Q.6b
ach of its 500 employees.
the date the offer was given.
wing additional conditions :
ny exceeds Rs.200 per share.
Rs.
50
44
38
36
r it was estimated that sales would increase by 20% each year.
mpany before completion of 5 years.
ccounts for the year ended 30 June 2017 (5 marks)
market condition is met
Period exp
3,230,000
Period exp
70,000
90,000
80,000
120,000
i.e KPMG View
Period exp
15,000
15,000
15,000
15,000
15,000
30,000
15,000
ple conditions (Market and non-market performance)
eaches Rs.50/share
e the share options vest in order to receive the options.
l expire in 10 years.
different scenarios?
yed and the share price is Rs.49

yed but revenues have not yet reached Rs.1 billion.
Rs.50 and half of the employees who received options
the employees currently remaining)
nt charged to profit or loss
e condition - Time is monthwise

nior employees during the accounting year ended 31 Dec 2006
s and senior managers on 1 Nov 2006
for at least 3 years before being able to exercise their options.

ers will remain with the company for 3 years or more.
Average 2006 31-Dec-06
5.5 5.8 estimated
2.4 3.8 estimated
l statements on 31 Dec 2006 and 31 Dec 2007. Ignore Taxation
Period exp
416,667
2,500,000
ash that are based on the

nts of the entity.
Counterparties
hether direct or indirect)
s a liability and not equity

FV of shares change, the value of liability will also change
the FV of shares at vesting date so we will change the value accordingly.
Share appreciation rights (SARs)
ck market
om shares
payment transaction
Period exp
104,400
94,000
179,600
104,400
94,000
179,600
ncash karaaya hai
54,000
om shares (Outstanding liability table)
FV
35
40
42
45
50
52
Instrument mai 2 cheezain aati hain (Employees remaining and not encashed yet)
Expense
513,333
578,667
235,500
(1,102,500)
(225,000)
513,333
578,667
235,500
562,500
1,102,500
1,250,000
225,000
234,000
appreciation rights (SARs)

3 4
72 78
(50) (50)
22 28
3 2
25 30
paraingay
der karkay expense book kartay hain
Expense
5.67
7.67
11.67
5
(30)
5.67
7.67
11.67
o the company
30
28
e condition - Share appreciation rights (SARs)

rights (SARs) to each of its 500 employees,
ntill 31 December 2003.
er 60 will leave during 2002 and 2003.
urther 25 will leave during 2003.
and the remaining
e shown below, together with the intrinsic values
the 5 years ended 31 december 2005 and the liability

mber for each of the 5 years.
Expense
194,400
218,933
47,127
(218,640)
(241,820)
194,400
218,933
47,127
225,000
218,640
280,000
241,820
282,500
shares) - Non-market performance condition
Expense
2,240,000
(2,240,000)
5,865,000
1,972,500
2,240,000
2,240,000
5,865,000
1,972,500
rument ko zero kardaingay if target is not met in non-market condition
shares) - Market condition

fair value bhi same hogi warna zero hogi
Expense
0
0
0
352,000
settled (Market condition)

of its employees on 1 Jan 2004.
rned equal to the share price
ns outlined, equal to the value

s issued to the finance director
Expense
7.33
(7.33)
18
has the right to choose the

pound financial instrument to
sured directly (that is

the fair value of the equity
f the goods or services
ounterparty (Direct measurement)

fair value of share amounting to Rs.20
e of liability ko less karna hai
600,000
200,000
e adjusted for any fair value change
200,000
660,000
200,000
e with the counterparty

fair value of Rs 500,000 on Jan
he following modes in 1 year

480,000
20,000
20,000
520,000
20,000
540,000
e with the counterparty (No SBPR and loss is booked on day 01)
aving a fair value of Rs 800,000
her of the following modes in
1,000,000
kartay hain
e with the counterparty

d having a fair value of Rs
made in either of the
ue to deferred credit terms):
1,050,000
150,000
fair value of the goods or

e equity instruments granted,
Normally transactions are

lement is the same.
e with the employee

hich she can, if she is still
es or cash to the value, on
£27 at the end of 20X4, £33

mployee elects to receive the
ment given ho tou phir
r fair value of liability

es ko opt karay gaa
chever is higher.
Expense
63,000
91,000
140,000
63,000
1,667
91,000
1,667
140,000
1,667
294,000
5,000
294,000
5,000
se karogay :
e consider karay instead of cash route
service condition kai baad aap ko share Rs.80 ka milay gaa
nse record karaingay
e with the employee

phantom shares
1,200 shares
held for 3 years after vesting date.
strictions, the entity

Rs.48/share
Expense
17,333
19,333
23,333
17,333
2,533
19,333
2,533
23,333
2,533
60,000
7,600
60,000
7,600
r 2009 Q.3
Expense
2,773,333
3,114,667
3,712,000
2,773,333
266,667
3,114,667
266,667
3,712,000
266,667
9,600,000
800,000
9,600,000
800,000
2015 Q.3b
Expense
4,000,000
4,320,000
4,880,000
4,000,000
633,333
4,320,000
633,333
4,880,000
633,333
13,200,000
1,900,000
13,200,000
1,900,000
2018 Q.6(i)
20,000,000
210,000,000
ay ya cash mai
kin agar koi present obligation hogi
igation arise hosakti hai :
i %age of shareholding change hosakti hai aur shareholders agree naa horahay hoon
e is with the company
200 shares to any employee
d is expected to vest at each reporting date are as follows :

Fair value of equity instrument
17
16
15
h settled i.e liability)

Expense
1,088,000
1,216,000
696,000
1,088,000
1,216,000
696,000
w karaingay
quity settled)
reat karaingay
PE
1,152,000
1,440,000
1,008,000
1,152,000
1,440,000
1,008,000
2,000,000
1,600,000
mai payment karna simple hai
cash mai payment karaingay tou yeh accounting treatment hogi
y aur baad mai
3,000,000
600,000
When FV of both options are different at settlement date
1,200
1,200
ecide karrahi hai to pay Rs.1,500 cash
1,500
When FV of both options are different at settlement date
1,200
1,250
1,500
f shares karaingay
ployee ko change/modify kardiya jaaye
fication
Not beneficial to employee
Increase in reward
i.e # of equity instruments
Market
condition
nn ki accounting nahi karaingay

for the employees
g of option
2 3 4
18
(12)
6
4
10 8
tive or zero
karaingay
PE
13,750
13,750
13,750
13,750
PE
20,000
20,000
13,750
13,750
33,750
33,750
50,000
105,000
Modification - Repricing of option

50 to each of its 30 key management personnel on 1 Jan 2004.
ecember 2007.
entity estimated that the options would vest with 20 managers.
educing the exercise price to Rs.15

y before the price reduction and Rs.11
2 3 4
(15)
(15)
11 9
PE
100,000
100,000
100,000
100,000
PE
36,000
72,000
72,000
100,000
136,000
172,000
172,000
Modification - Repricing of option

each of its 500 employees.
over the next 3 years.
that 100 employees will leave during the 3 year period
d the entity reprices its share options.
Years 2 and 3 and hence the total expected
Year 3, to bring the total expected
103 employees ceased
end of year 3.
each of the original share options granted
atements for Years 1 to 3

3
PE
195,000
200,000
200,500
PE
59,250
59,850
Modification - Different vesting period for extra award

its 5 board members, subject to a 4 year
ce is also Rs.100
s deeply out of the money.

s on the employees, C re-prices the share options
m the date of modification.

tion is Rs. 0.1 and immediately after the modification is Rs. 9.7,
will remain in service over both the original vesting period
(100)
0
9.7 9.6
PE
25,000
25,000
25,000
5,000
PE
4,000
12,000
6,400
9,600
6,400
y nai relaxation provide kardi

would be beneficial for the employee
for the extra award table
Modification - Relaxation of market condition

tion to its CEO subject to a 2 year service condition
e of the equity instruments granted, including

et is Rs.80.
D now estimates that it is highly unlikely that the share price target
hare price target of Rs.75

condition immediately before the modification is Rs.1
(75)
0
56 55
PE
40,000
40,000
PE
55,000
Modification - Additional # of shares

ation to its CEO, subject to a 3 year service condition.
ed payment arrangement and there are no indications e.g past practice
mic position of the CEO,

000 compensating the CEO for the price fall of Rs.10 per share
PE
5,000
5,000
5,000
PE
5,000
5,000
is the separate award
Modification - Relaxation of service condition

e of its employees, subject to a 5 year service condition
ployee is expected to remain in service.
employee remains employed
PE
2,000
2,000
3,500
2,500
Modification - Relaxation of service condition

example, but the employee leaves at the end of 2011.
employee forfeights the right to receive the share-based payment,
at the employee has met the modified service condition.
PE
2,000
8,000
Modification - Relaxation of non-market performance condition

million at the end of the service peirod.
profit target is also expected to be met.
80 million (a beneficial modification),
PE
2,500
(2,500)
7,500
(7,500)
2 3
89 94
(50) (50)
39 44
4 0
43 44
Application of intrinsic value
of shares (upon which options vested)

140
148
147
150
PE
1,104,000
1,140,000
1,506,000
Mix question with modification (Winter 2016 Q.4(a))

tions in the
PE
426,667
426,667
(853,333)
PE
400,000
400,000
550,000
PE
405,000
Grant of share options that is subsequently modified
PE
65,000
65,000
50,000
65,000
65,000
50,000
180,000
Modification that includes both beneficial and not beneficial for employee
ant date fair value is Rs.10,000
ut in a single arrangement :
1 by reducing the exercise price, and
karkay net karkay dekhaingay
PE
3,333
3,333
3,333
Mix question with modification (Winter 2018 Q.1(a))

PE
31,200,000
(31,200,000)
154,800,000
consider karnay hain
PE
15,990,000
16,770,000
31,200,000
31,200,000
170,790,000
16,770,000
3,600,000
183,960,000
P
P
P
P
P
P
P
P
P
P
IFRS I.E #2
P
P
P
P
IFRS I.E #6
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
IFRS I.E #13
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
List of different types of questions done :
i.Transactions with third parties (Not employees)
Equity-settled share-based payment (Transactions with employees) :
Service condition
i.Basic concept of service condition
ii.Service condition - Immediate vesting
iii.Service condition - 2 tables
iv.Service condition - Time is monthwise
Non-market performance condition :

i.Basic concept of non-market performance condition
ii.Non-market performance condition - Variable vesting date
iii.Non-market performance condition - Only 1 employee (Sally)
iv.Non-market performance condition - Variable vesting date - IE #2
Market condition :
i.Basic concept of market condition
ii.Market condition - Vesting condition not met
iii.Multiple conditions (Service + Market)
iv.Actual vesting period > Expected vesting period - IE #6
v.Multiple conditions (Non-market + Market)
vi.Multiple conditions (Non-market + Market) - Winter 2017 Q.6b
Cash-settled share-based payment (Transactions with employees) :
Phantom shares :
i.Service condition (Cash-settled)
ii.Service condition (Cash-settled) - Outstanding liability table
iii.Non-market performance condition (Cash-settled)
iv.Market condition (Cash-settled)
Share appreciation rights :

i.Service condition (Cash-settled)
Choice of settlement
Transaction with third parties :

i.Option rests with the counterparty - SBPR
ii.Option rests with the counterparty - Loss booked on day 01
Transaction with employees :

i.Option rests with the counterparty i.e employee - SBPR
ii.Option rests with the counterparty i.e employee - SBPR and treatment of non-vesting conditions - IE #13
iii.Option rests with the counterparty i.e employee - SBPR and treatment of non-vesting conditions - Winter 2009 Q
iv.Option rests with the counterparty i.e employee - SBPR and treatment of non-vesting conditions - June 2015 Q.3
v.Option rests with the counterparty i.e employee - SBPR and treatment of non-vesting conditions - June 2018 Q.6(
vi.Option rests with the company - initially treated as cash-settled
vii.Option rests with the company - initially treated as equity-settled (treatment to retained earnings and ex-gratia e
Modification
i.Transaction with employee (equity-settled) - Repricing
ii.Transaction with employee (equity-settled) - Repricing and Different vesting period for extra award
iii.Transaction with employee (equity-settled) - Relaxation of market condition
iv.Transaction with employee (equity-settled) - Additional # of shares
v.Transaction with employee (equity-settled) - Relaxation of service condition
vi.Transaction with employee (equity-settled) - Relaxation of non-market performance condition
vii.Transaction with employee (equity-settled) - Mix question with modification - Winter 2016 Q.4(a)
Grant of share options that is subsequently modified

Modification that includes both beneficial and not beneficial for employee
viii.Transaction with employee (equity-settled) - Mix question with modification - Winter 2018 Q.1(a)
Application of intrinsic value

ng conditions - IE #13
ng conditions - Winter 2009 Q.3
ng conditions - June 2015 Q.3b
ng conditions - June 2018 Q.6(i)
tained earnings and ex-gratia expense)
for extra award
ter 2016 Q.4(a)
nter 2018 Q.1(a)

1 25 31 41 43 70
44
3 28 32 40
2 45
4 33
5 46
35
7 47
8 34
9 48
38 49
11 36
12 37 50
13
54
16
23 52
17
18 51
55

Ifrs 02

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Advanced Accounting and Financial Reporting - A

IFRS 02 : Share Based P

List of topics to be covered :

Notes & Practice

Share-based payment transaction

(a) Receives goods or services from

Company Agreement between 2 parties

(b) Settles the amount or incurs an obligation to settle the transaction

Company Agreement between 2 parties

i.Equity-settled share-based payment transactions

ii.Cash-settled share-based payment transactions

iii.Transactions with a choice of settlement

iv.Transactions among group entities

The following transactions are outside the scope of IFRS 02 :

i.Transactions with employees and others in their capacity

ii.The issue of equity instruments in exchange for control

*Illustration Difference between IFRS 02 & IFRS 09

Case #1 - Counterparty is an employee

Case #2 - Counterparty is other than employee

Grant date Vesting conditions Vesting date

There are 3 types of vesting conditions :

Direct and indirect measurement

Case #1 - Counterparty is other than employee

Goods (FV of goods/services received)

Case #2 - Counter party is an employee

Indirect measurement only

Salary expense xxx

Transaction with third parties (Not employees)

Question #1 - ARM Handout Transaction with third party

Months/Yr Rate/hr Hours # of shares Total consideration

Equity-settled share-based payment (Transaction with employee)

Vesting period exists

*Illustration Basic question on service condition

Yr Instrument FV Time Cumm exp

Equity/Share-based payment reserve 44,160,000

Question #3 - ARM Handout Basic question on service con

Yr Instrument FV Time Cumm exp

Equity/Share-based payment reserve 49,500,000

Question #2 - ARM Handout Service condition - Immediate

Question #4 - ARM Handout Basic question on service con

Yr Emp left Furth expec Total

Yr Instrument FV Time Cumm exp

Question #5 - ARM Handout Basic question on service con

Yr Emp left Furth expec Total Staying

Equity/Share-based payment reserve 664,500

Types of equity instruments

There are 2 types of equity instruments that can be given to employees :

Non-market performance condition

*Illustration Basic question on non-market performance co

Variable vesting date

Question #7 - ARM Handout Basic question on non-marke

Yr Instrument FV Time Cumm exp

Question #8 - ARM Handout Basic question on non-marke

Yr Instrument FV Time Cumm exp

Question #9 - ARM Handout Non-market performance con

Yr Instrument FV Time Cumm exp

*Illustration Discussion on market condition

i.Service condition Adjust i.e = 0

ii.Non-market performance condition Adjust i.e = 0

iii.Market condition Do not adjust

Question #11 - ARM Handout Basic question on market con

Yr Instrument FV Time Cumm exp

Remuneration expense (2550045) 562,500

Remuneration expense (950052) 234,000

Remuneration expense (10015015) 225,000

Remuneration expense (10014020) 280,000

Remuneration expense (10011325) 282,500