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IFRS 2: Share-based Payment

Chapter 13
Share-based
Payment

Copyright © 2019 by McGraw-Hill Education (Asia). All rights reserved. 2

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Learning Objectives

1. Understand what a share-based payment transaction is;

2. Know the different types of share-based payment transactions;
3. Understand the general accounting principles for share-based
payment transactions;
4. Understand the accounting treatment for:
a) equity-settled share-based payment transactions;
b) cash-settled share-based payment transactions;
c) share-based payment transactions with a cash alternative;
5. Understand how to account for modifications to share-based
payments.

Content

1. Introduction
2. Equity-settled Share-based Transactions
3. Cash-settled Share-based Transactions
4. Share-based Payment Arrangements with a Cash
Alternative

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1.1. What is share-based transaction?

 ESOP – Executive share option plan

(transaction with employees)
 Share – based transaction with third-party which provide goods IFRS 2
and services
 Shares issued as consideration in business combination -> IFRS 3

 Financial instrument transaction -> IAS 32 & IFRS 9

 ESOP:
 Fixed share option plans
 Restricted performance share option plans
 Share appreciation rights

Examples

 Cty A cam kết thưởng 3.000.000 quyền chọn mua cổ

phiếu (thực hiện sau ba năm) cho CEO của mình.
Cty B có kế hoạch cho phép tất cả nhân viên của mình
mua cổ phiếu của chính cty với mức chiết khấu 10% so
với giá thị trường.
Cty C ký kết hợp đồng với đối tác cung cấp vật tư cho
cty đổi lấy lượng cổ phiếu xác định của chính cty C

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1.2.Types of Share-based Transactions

Share-based transactions

Equity-settled Cash-settled Equity- or cash-settled

Acquires goods or Agreement which
services by incurring a entities other party to
Receives goods or
liability at amounts receive cash or other
services as payments
based on the value of assets based on value of
for equity instruments
shares or other equity equity instruments or to
of the entity
instruments receive equity
instruments

1.3. Terms Used in Share-based Payment

Transactions

Grant Date

Measurement
Date
Vesting
Date
Non-
vesting Vesting
Condition Reload
Condition Feature

Forfeiture FV @ Intrinsic
Rate Grant Date Value

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Các thuật ngữ

• Grant date (ngày phát hành - đảm bảo): là ngày mà các quyền chọn cổ
phiếu hay các kế hoạch khác thanh toán bằng cổ phiếu được đảm bảo cho
người lao động. Tại ngày này, cả DN và người lao động đều đồng ý với
các điều khoản của kế hoạch. Nếu kế hoạch cần được cổ đông phê chuẩn
thì grant date là ngày phê chuẩn.
• Measurement date (ngày đo lường ): là ngày đo lường FV của quyền
chọn cổ phiếu/hay KH thanh toán khác bằng CP được đảm bảo. Thông
thường ngày đo lường trùng với ngày đảm bảo. Trong một vài trường
hợp, ngày đo lường phụ thuộc vào điều khoản và điều kiện của kế hoạch.
Các giao dịch với các đối tượng không phải là người lao động, thì ngày
đo lường FV của share option là ngày DN nhận được SP/DV.
• Vesting date (ngày thụ quyền – trao quyền): Ngày thỏa mãn các điều
kiện để người lao động chính thức sở hữu cổ phiếu.
• Vesting period (kỳ chuyển quyền): là được tính từ ngày Grant date tới
vesting date. Kỳ vesting có thể cố định hay thay đổi tùy thuộc vào điều
khoản của kế hoạch. 9

Các thuật ngữ

• Vesting condition (điều kiện trao quyền): là điều kiện phải được thỏa
mãn thì người thụ hưởng mới có được quyền sở hữu cổ phiếu DN hay
được thanh toán số tiền dựa trên CP. Có hai loại điều kiện:
(i) điều kiện về dịch vụ cung cấp cho DN hoặc
(ii) điều kiện về dịch vụ cung cấp cho doanh nghiệp & kết quả kinh
doanh của DN đạt mục tiêu.
• Non- Vesting condition: Không phải là hai điều kiện trên, nhưng cần
thỏa mãn thì người thụ hưởng mới được quyền sở hữu CP hay thanh
toán tiền. Như hạn chế chuyển nhượng CP
• Forfeiture rate (tỷ lệ thu hồi - tước quyền): Tỷ lệ số lượng cổ phiếu bị
thu hồi do không thực hiện đầy đủ các điều kiện. Chẳng hạn không cung
cấp dịch vụ đúng kỳ như yêu cầu. Tỷ lệ thu hồi là tỷ lệ lượng nhân viên
rời DN trước khi hết kỳ chuyển quyền và thường được ước tính ngay từ
khi bắt đầu kế hoạch. Việc ước tính được rà soát lại vào cuối mỗi kỳ kế
toán trước ngày trao quyền.
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Các thuật ngữ

• Fair value at grant date: nếu quyền chọn hay kế hoạch được niêm
yết giá trên sàn giao dịch thì FV là giá thị trường. Nếu không được
niêm yết, FV được xác định theo mô hình định giá thích hợp (nhị
phân hay Black Scholes ). Khi không xác định được thì áp dụng
tập hợp các quy định kế toán khác dựa trên xác định giá trị nội
tại.
• Reload feature: Đặc tính này của kế hoạch quyền chọn cổ phiếu tự
động đảm bảo quyền chọn bổ sung khi người nắm giữ quyền chọn
trước đó đã thực hiện các quyền chọn được đảm bảo trước đó và
nhận cổ phần thay vì nhận tiền.
• Intrinsic value (giá trị nội tại): Là chênh lệch giữa FV của cổ
phần cơ sở với giá thực hiện.

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Terminology
Vesting period

Grant date Vesting date

- No. Employees Employees become Exercise date
- No. Years entitled to the share
- No options/rights based payment

Spread the Fair Value(1) of the share

based payment over the vesting period(2)
FAIR VALUE (FV)
based on the number of employees
expected to exercise(3) the option
Equity settled Cash settled
Fair value AT Fair value AT
grant date reporting date
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Illustration 13.1

Capital Corpration Ltd (CCL), a listed company, introduced a share option scheme
called the CCL share Option Scheme on 1/1/20X1. All managers accepted the terms of
the share option scheme on 5 January 20X1. Under the scheme, ten key managers
were garanted 100.000 share options each. Each option entiled the grantee to take up on
ordinary share in the company. The options could be exercised at any time after two
years (during which time the employee must not leave the entity), but no later than the
expiry date, which was 5 January 20X6. The exercise price was $2 per share, which
was the actual market price on the date of the grant.
Other information and assumptions are as follows:
a) At the date of the grant, the estimated fair value of the share option was $0.4 per
option. CCL estimated that two out of the ten managers would leave the entity
before 5 January 20X3.
b) One of the managers left the company in 20X1. At the end of 20X1, CCL increased
its estimate of the number of managers leaving the company from two to three.
c) In 20X2, another manager left CCL
d) On 15 January 20X3, all of the remaining managers exercised their share option
when the market price of CCL’s share was $ 2,8.
e) CCL’s financial year-end is 31 December.
Require: Calculate the remuneration expenses over vesting period 13

Content

1. Introduction
2. Equity-settled Share-based Transactions
3. Cash-settled Share-based Transactions
4. Share-based Payment Arrangements with a Cash
Alternative

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General Accounting Principles

General Principal
Expense(*) charged to income statement and corresponding increase in equity
component is recorded when goods or services are provided by counterparties
Recognition of expense
Past services Future services
Amount is recognized as Expense is recognized
expense immediately over vesting period
Measurement: Fair value of expense

Provided by employee Provided by non-employees

Based on FV of equity instruments on Based on FV of goods and
grant date* and is subsequently not services rendered at date of
revised.
If FV (Equity instruments) at grant date
receipt
cannot be reliably measured -> at If not possible -> at FV(granted
intrinsic value equity instruments)
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*FV of granted equity instruments = Number of equity instruments X FV at grant date

Determination of fair value in share-based transactions

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Note

• FV at grant date
= current market price – PV(exercise price) –
FV of dividends (that will not receiveed during the
vesting period)
• Instrinsic value
= Market value at Xi – Exercise price at Xi

Tham khảo

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2. Equity-settled share-based payment transactions

- Giao dịch được thanh toán bằng cổ phiếu của doanh nghiệp
- Đo lường: FV của option/right… vào ngày đảm bảo (grant
date)
- Cuối mỗi kỳ báo cáo:
- Ước tính số dư lũy kế giá trị giao dịch
- Xác định chi phí ghi nhận cho kỳ kế toán và ghi nhận:

Dr- Expense (P/L)

Cr- Equity – Option/right

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2. Equity-settled share-based payment transactions

• Vào ngày trao quyền (vesting date):

- Xác định chính xác toàn bộ giá trị giao dịch tính cho cả kỳ
đảm bảo dựa trên các điều kiện đảm bảo thỏa mãn
- Ghi nhận/điều chỉnh chi phí của kỳ cuối cùng.
• Vào ngày thực hiện (Exercise date):
Người thụ hưởng thực hiện quyền chọn mua CP của DN theo
giá thực hiện quyền chọn, DN thanh toán cho người thụ hưởng
bằng cố phiếu của mình:
Dr- Cash
Dr- Equity-option
Cr- Equity- Share capital 19

Example: Fair value equity settled (goods)

• Caerphilly purchased inventory at cost of $ 10 million on 1 July

2021. The goods were sold in Nov 2021 for $ 14 million.
• Caerphilly had cash flow problems during 2021 and negotiated
with its supplier to exchange the goods for options on its shares.
The shares had a market value of $ 11,5 million on 1 July 2021.
Explain how the transaction should be dealt with in the fiannacial
statements for the year – ended 31 Dec 2021

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2. Equity-settled share-based payment transactions

Illustration 13.1 – Accounting for a fixed option plan
Capital Corpration Ltd (CCL), a listed company, introduced a share option scheme
called the CCL share Option Scheme on 1/1/20X1. All managers accepted the terms of
the share option scheme on 5 January 20X1. Under the scheme, ten key managers
were garanted 100.000 share options each. Each option entiled the grantee to take up on
ordinary share in the company. The options could be exercised at any time after two
years (during which time the employee must not leave the entity), but no later than the
expiry date, which was 5 January 20X6. The exercise price was $2 per share, which
was the actual market price on the date of the grant.
Other information and assumptions are as follows:
a) At the date of the grant, the estimated fair value of the share option was $0.4 per
option. CCL estimated that two out of the ten managers would leave the entity
before 5 January 20X3.
b) One of the managers left the company in 20X1. At the end of 20X1, CCL increased
its estimate of the number of managers leaving the company from two to three.
c) In 20X2, another manager left CCL
d) On 15 January 20X3, all of the remaining managers exercised their share option
when the market price of CCL’s share was $ 2,8.
e) CCL’s financial year-end is 31 December.
Require: Calculate the remuneration expenses over vesting period 21

Illustration 13.1 – Accounting for a fixed option plan

Vesting period

Grant date: 5/1/X1 Vesting date: 5/1/x3 Exercise date

Employees become
5/1/X6
- No. Employees
- No. Years entitled to the share
- No options/rights based payment
Note:
- The grant date: 5/1/X1: measurement date, the No of share, the market price of
share & the exercise price are known.
- AT the grant date: the exercise price = market price of share -> No intrinsic value.
However, share option has time value; Since the share option are not traded, the
Fv of the option has to be estimated using a valuation model.
- The period: 5/1/X1 -> 5/1/X3: Vesting period; 5/1/X3: vesting date;
- vesting condition: the two-year service period.
- Remuneration expense is recognized and allocated (from 5/1/X1-> 5/1/X3)
- The related tax effect are ignored in this example.
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10 CEO
2 Years
5/1/X6
100.000 Options/CEO 15/1/X3 Exercise date
V date:5/1/X3
Strick price: 2$/CP
31/12/X1 31/12/X2
5/1/X1 1 CEO 1 CEO

Grant date: Reporting date: Reporting date (31/12/X2):

-FV: 0,4$/Option -FV(GD): 0,4$/Option -FV(GD): 0,4$/Option
-FR ước tính: 2/10 CEO -FR ước tính: 3/10 CEO -FR : 2/10 CEO

31/12/20X1:

31/12/20X2:

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Illustration 13.2 – Performance plan with performance conditions

On 1 Nov 20X0, Alto Corporation announced a share incentive plan for 100
executives. The terms of plan are as follows:
a) The number of options each executive would receive was given by following
formula: 50.000 * (1+ simple average annual rate of increase in net earnings
from 1/1/20X1 to 31/12/20X3). An encrease in net earnings is a performance
condition. IFRS 2 allows the performance target to ralate to entity as a whole or a
part of the entity, such as a division. A reference to a share index is a non- vesting
codition and not a performance condition.
b) The exercise price was $ 3,6 per share, which was the same as the market price
(share) on grant date.
c) The options were not transferable, they were exercisable three years from the
grant date. The options expired at the end of five years from the grant date.
d) The options would be forfeited should any manager leave the entity during the
service period of three years.
e) The estimated fair value of the share option at grant date was $0.50.

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Illustration 13.2 – Performance plan with performance conditions

- The plan was approved by sharehoders on 1 Jan 20X1. AT the date of the grant of
the share option, the management of Alto Corporation estimated that the company’s
net earnings would increase by 10% a year. Management also estimated a forfeiture
rate at of 10%, that is, 10% of the excusive would leave the company by the end of
20X3.
- At the end 20X1, the net earnings of Alto increseased by 15% over 20X0. Three
execusives left the company in 20X1. Management revised the forfeiture rate to
8% by the end of 20X3, and net earnings were revised to grow by an average of
12% for the three-year period.
-In 20X2, two execusives left the company and net earnings increased by 8% over
20X1. Management retained its estimate of the forfeiture rate at 8% and estimeted
net earnings to grow by an average of 10% over the three-year period.
-In 20X3, two execusives left the company and net earnings insreased by 13% over
20X2, resulting in a simple average annual increase of 12% for the 20x1 to 20X3
period. On the 31 Dec 20X3, the share price of Alto was $ 5 and all remaining
executives exercised the options granted to them under the performance-based
scheme.
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Illustration 13.2 – Solution

Date Cumulative remuneration expense Current year’s remuneration expense
31.Dec.X1

31.Dec.X2

31.Dec.X3
The journal entries:
 31/12/20X1:

 31/12/20X2:

 31/12/20X3:

 15/1/20X4:

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Note

• Share option are not excercised after the vesting date:

 IFRS 2:23 does not permit reversal of remuneration
expense recognized during vesting period even if share
options are not excercised.
Essentially, goods and services have been received and the
expense recognized reflect consumption of the benefits of these goods
and services.
 IFRS 2 does not prohibit the entity from transfering from
one component of equity to another.

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Modifications, cancellations, and settlement

and new grant of equity instruments
Modifications
Change FV of equity instrument

Increase Reduce
Reduction of exercise price,
Prolong vesting period, increase
increase in number of equity
exercise price,..
instrument,…

Recognize: Increase asset/expense

immediately or allocation over Ignore effect of modification
remaining vesting period.

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Modifications, cancellations, and settlement

and new grant of equity instruments
Cancellations/ settlement and new grant of equity instruments

Any
• Should be recognized immediately
unrecognized
amount

• Up to FV of Equity instrument: Dr Equity

• In excess of FV of Equity instrument: is
Any added
payment to the recognised as an Expense
cancelation or
settlement

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Modifications, cancellations, and settlement

and new grant of equity instruments
New grant

• Accounted for as a modification of the original

grant
• Accounted for as a new grant

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Illustration 13.3 – Modification to non- vest share options

On 1 Jan 20X1, Reford Corporation, a listed company, granted 30.000 share options
to each of its 100 employees. The options were exercisable three years from the date
of the grant, conditional upon the employee remaining in the entity’s employment
during the three- year service period. The option would expire ten years after the date
of the grant. The exercise price was $3, which was also the market price at the grant
date. The fair value of each share option was estimated at $ 1,5 at the grant date.
Management estimated a forfeiture rate of 10% over three years, that is, a total of ten
employees were estimated to leave the entity by the end of 20X3. Five employees left
during 20X1, but no adjustment was made to the forfeiture rate at the end 20X1.
Another five employees left the entity during 20X2. At the end of 20X2, management
revised the forfeiture rate of 15%. Two employees left in 20X3.
At 1 Jan 20X2, the market price of Reford Corporation share fell to $2,2. Reford
Corporation revised the exercise price to $ 2,2. At this date, the fair value of the
original option before repricing was estimated at $1; the fair value of the modified
option was estimated at $1.3.

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Content

1. Introduction
2. Equity-settled Share-based Transactions
3. Cash-settled Share-based Transactions
4. Share-based Payment Arrangements with a Cash
Alternative

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3. Cash-settled Share-based Transactions

• Share-based plans that pay cash to employees instead of issuing new

equity instruments

• Example is share appreciation rights

– Employees entitled to cash payment based on intrinsic value of
equity instruments at the date of payment

• Entity incurs liability for the services received from the employees
– Measured initially and remeasured at each reporting date to
settlement date
– Fair value estimated using option valuation model (IFRS 13- FV)
– Changes in fair value goes to profit and loss
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3. Cash-settled Share-based Transactions

- Giao dịch được thanh toán bằng tiền

• Đo lường: FV của option/right… vào mỗi ngày lập BCTC
(reporting date)
• Cuối mỗi kỳ báo cáo:
- Ước tính số dư lũy kế giá trị giao dịch
- Xác định chi phí ghi nhận cho kỳ kế toán và ghi nhận:
Dr- Expense (P/L)
Cr- Liability

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3. Cash-settled Share-based Transactions

• Vào ngày trao quyền (vesting date):

- Xác định chính xác toán bộ giá trị giao dịch tính cho cả
kỳ đảm bảo dựa trên các điều kiện đảm bảo thỏa mãn
- Ghi nhận/điều chỉnh chi phí của kỳ cuối cùng.
• Vào ngày thực hiện:
Dr- Liability
Cr Cash

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3. Cash-settled Share-based Transactions

Illustration 13.4 –Share appreciation rights

On 1 Jan 20X1, ABC Company entered into an arrangement to grant 1.000 SARs to
each of its 100 employees. The vesting period ended on 31 Dec 20X3. The exercise
price was $30 per share. Each SAR entitled the employee to a cash payment that was
equal to the increase in share price over the exercise price of $30 at settlement date.
The excess of share price over the exercise price at the date of exercise was essentially
the instricsic value of the SAR. For simplicity, the illustration assumes that exercise
was made at the end of the year. Additional information is as follows:

20X1 20X2 20X3 20X4

Number of employees who left the entity 3 4 2
during the year
End-of-year estimate of the number of 8 10 9
employees leaving during of vesting period
Number of employees who exercised SARs 40 51
on 31 Dec of that year
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Illustration 13.4 –Share appreciation rights

The fair values and instrinsic values of the SARs over the vesting period are as follows:

Date Share price (FV) Fair value (SAR) instrinsic value

31 Dec 20X1 $40 $12

31 Dec 20X2 $42 $15
31 Dec 20X3 $45 $18 $15 (=45-30)
31 Dec 20X4 $49 $22 $19 (=49-30)

Liability at FV by The excess of share

applying option price over the exercise
pricing model price at the date of
exercise was
essentially the
instricsic value of the
SAR.
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How to recognize share-based payments

(1)The entity pays cash in return for (2)The entity issues shares in return
the provision of goods or services for the provision of goods or
DR- Asset/(P/L)- Expense services
CR Liability DR- (P/L) )- Expense
CR Equity

(3) There’s also the third type of share-based payment arrangements: transactions
in which either the entity or the supplier has a choice of settlement (to receive
equity instruments or cash / other assets).
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Content

1. Introduction
2. Equity-settled Share-based Transactions
3. Cash-settled Share-based Transactions
4. Share-based Payment Arrangements with a Cash
Alternative

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4. Share-based Payment Arrangements with a Cash Alternative

• Share-based arrangement contains provisions in which either the

employees or the entity can elect to receive or pay either cash or
an equity instrument
• Accounting treatment depends on which party has the right to
choose the settlement method
• Cash alternative may be in the form of:
– “Phantom” shares which gives the holder the right to a cash
receipt
– SARs (share appreciation rights) that grant the holder the right
to a cash amount that is the excess of the fair value on
settlement date over the exercise price.

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(1) Choice of the Settlement Method Rests with the Entity

Indications of obligations to settle in cash

Choice of
History of
settlement Past practices Stated policy
settling in
has “no of settling in of settling in
cash when
commercial cash cash
requested
substance”

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(1) Choice of the Settlement Method Rests with the Entity

(1) Liability
Account as cash-settled
Yes
share-based transaction

Obligation to
(i) Repurchase
settle in cash Repurchase of
Excess of FV of
equity (cash
Settle in cash equity -> expense
paid - FV of
equity)
No (ii) Issue share
(2) Equity
Issue equity No further Excess of FV of
instruments accounting equity -> expense

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Choice of the Settlement Method Rests with the Entity

Prior to settlement (2- equity)

Dr- remuneration expense: 100
Cr Equity- option: 100
At settelement
date
Entity choice to Dr Equity –Option: 100 Dr Equity-option: 90
settle in cash Dr Remuneration expense: 10 Cr Cash: 90
Cr Cash: 110
Entity choice to No further accounting Dr Remuneration expense
settle through equity Dr- Equity-option Dr- Equity-option
issue Cr- Equity- SC Cr Equity-SC

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Example: Choice of the Settlement Method Rests with the Entity

Entity Z has choice to settle its employee options in cash $ 110.000 or shares. There is
no present obligation and no past practice to settle in cash. On grant date, the
equity value is $ 100.000. The option are vested over a service period of two years.

• At the end of year 1, the journal entry is:

Dr- Remuneration Expense:50.000 $ (=100.000 *1/2)
Cr- Equity (Option):.................: 50.000$

Scenario 1: Settlement in cash, cash settlement has higher value than shares :
• At the end of year 2, Z chooses to settle in cash $ 110.000:

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Example
Scenario 2: Settlement in equity, cash settlement has higher value than
shares :
• At the end of year 2, Z chooses to settle in equity $ 100.000:

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Example
Scenario 3: Settlement in cash, cash settlement has lower value than
shares :
Z has a choice to settle its employee options in cash $90.000 or shares.
The is no present obligation and no past practice to settle in cash. On
grant date, the equity value is $ 100.000.
• At the end of year 2, Z chooses to settle in cash $ 90.000:

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Example

Scenario 4: Settlement in equity, cash settlement has lower value than

shares :
• At the end of year 2, Z chooses to settle in share $ 120.000:

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(2)Choice of the Settlement Method Rests with the Employee

• Substance of arrangement is grant of a compound financial instrument with

debt and equity component
– Debt component: employee’s right to demand a cash settlement
– Equity component: employee’s right to demand settlement in equity
instruments (forfeiture of the right to receive cash)
• Relationships between debt and equity component
Fair value of debt component = Fair value of the “cash alternative”

Fair value of equity = Fair value of the – Fair value of the

component “equity alternative” “cash alternative”

Fair value of compound = Fair value of the + Fair value of the

financial instrument debt component equity component

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Choice of the Settlement Method Rests with the Employee

Measurement
Vesting Period Settlement Date
Date

Same as cash-settled share-

Fair value of the based payment transactions Liability re-measured
Debt “cash alternative” and at fair value and
re-measured and reversed.
recognized in P&L

Same as equity-settled
Difference in fair Remains in equity, no
share-based payment
value of “equity reverse, but is
Equity transactions and
alternative” and transferable from one
re-measured and recognized
“cash alternative” component to another
in equity

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Illustration 13.5 –Share based transaction with a cash alternative

On 1 Jan 20X3, Delta Corporation granted its chief executive officer an award of
either a cash payment that was equal to 100.000 shares of Delta Corporation (the
cash alternative), or 400.000 share options with an exercise price of $3,0 (the equity
alternative). The exercise price was the same as the market price of the Delta
Corporation on the date of the grant. The choice lay with the chief executive officer at
the vesting date. The grant, which had a vesting period of three years, would expire
five years after the grant date.
The FV of the share options (the equity alternative) at 1 Jan 20X3 was estimated at
$ 1,2 per option using an option valuation model. The FV of the two components of
the compound financial instrument were estimated at measurement date as follows:

Compound FV of equity alternative (400.000 * $1,2) $480.000

3$: FV (share – 1/1/X3) Less FV of debt compenent (100.000 *3$) (300.000)
FV of equity component $180.000

The share prices of Delta Corporation at the end of 20X3 and 20X4 were $3,3 and
$3,6 respectively. Assume the following share price at the end of 20X5
Situation 1: The share price of of Delta Corporation at the end of 20X5 was $3,8
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Situation 2: The share price of of Delta Corporation at the end of 20X5 was $4,5

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Illustration 13.5 –Share based transaction with a cash alternative

Situation 1: The share price of of Delta Corporation at the end of
20X5 was $3,8
Cash alternative
Share option (Instrinsic value)
Difference in favour of the cash alternative

CEO will choose ????

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Illustration 13.5 –Share based transaction with a cash alternative

Situation 2: The share price of of Delta Corporation at the end of 20X5 was $4,5

Cash alternative
Share option (Instrinsic value)
Difference in favour of the equity alternative

CEO will choose???

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Illustration 13.5 –Solution

Situation 1: The share price of of Delta Corporation at the end of 20X5 was $3,8

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Illustration 13.5 –Solution

Situation 1: The share price of of Delta Corporation at the end of 20X5 was $3,8

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Illustration 13.5 –Solution

Situation 2: The share price of of Delta Corporation at the end of 20X5 was $4,5

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Illustration 13.5 –Solution

Situation 2: The share price of of Delta Corporation at the end of 20X5 was $4,5

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