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Hi,
I have uploaded the question and the solution on the docstoc website, here is the link so you can view it (please click on Full screen for better visibility)
https://www.docstoc.com/docs/160647841/KPT-TYU-3-IFRS-2
Just wanted to know that why the “average annual increase in sales volume” is being considered for calculating the equity reserve amount and annual charge to P&L when the question clearly states that the employees become eligible if the “annual increase in sales volume” (not the average) is over a particular percentage?
I seem to remember that performance benchmarks are ignored when valuing share based payments!
If this is the case then why the sales figures are being mentioned in the solution every time an expense is booked and an amount credited to the “equity reserve”?
An extract from Kaplan Text 2013 is mentioned below
“Non-market performance conditions are taken into consideration when estimating the number of share options that will vest at a later date. Consequently, they must be evaluated at each reporting date throughout the vesting period and will affect the expense recognised in profit or loss each year. Examples of non-market performance conditions include EPS or profit targets.”
I hope I am raising a valid question
Hi I am sorry I can’t seem to answer ur question but can u tell that is this book(Kaplan) the only resource you are using or are you using something else as well like tuition or any other book etc?
Sir, please reply to my question
@sameed its ok dear, no need to be sorry for that. I am using kaplan as my primary source of information, if i don’t understand any topic then I move on to Emile Woolf. I am using kaplan’s revision kit only.I already have answered your question in an earlier response. Now you’re asking a further question of me which I don’t understand. That’s why I have referred you to ask Kaplan direct!
Before posting I viewed the thread to see if your response is already there or not. The time difference between our posts is 3 mins so maybe that’s why I was not able to read your response. I apologize s for that.
Earlier you stated that “I SEEM to remember that performance benchmarks are ignored when valuing share based payments!”, so I quoted some lines from the Kaplan text which I felt were contradicting your statement. I thought either you would reply with one of the following three responses
1) I haven’t understood the text correctly
2) I have not referred the text in context
3) maybe you are incorrectand yes, I will contact kaplan publishing too.
Thanks.
Hi frafiq
It’s been nearly 4 months since I looked at anything to do with share based payments and I do not have a copy of my own course notes to hand.
May I respectfully ask you to look in the OT course notes where I seem to remember it says something like “performance benchmarks are ignored because performance is already taken into account when valuing the share based benefit”
If that’s what it says (and I’m pretty sure that it is) then your only option is to contact Kaplan direct because their extract quoted by you appears to contradict my own notes.
And do please let me know their response
Cheers
Mike
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Is there any changes or amendments in P2 syllabus for december 2013? Please tell me.
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Some gyus are saying that there is some changes in IAS-19.I have 2012 bpp book.so can u tell me that if i can use this 2012 book or i have to buy the new one.If there are changes plz tell me.
OT course notes cover the Employee Benefit changes. That should be enough
Dear Sir, I received the following reply from Kaplan Publishing:
“Further to your email our content specialist has confirmed that we have made the mistake. The question wording needs to be amended as follows:
– If the volume of sales increases by an average of 5 – 10% per year, each eligible employee will receive 100 share options
– If the volume of sales increases by an average of 10 -15% per year, each eligible employee will receive 200 share options
– If the volume of sales increases by an average of 15%+ per year, each eligible employee will receive 300 share options.”———————————————————————————————————————————————————————
Sir, I went through the OT notes and found the following statements on Pg 164 (Chapter 19 Share based Payment Schemes)
“• performance conditions ( also called vesting conditions)
• if related to market price of company’s shares, these conditions are ignored for the purposes of estimating the number of shares which will vest ( already taken into account when estimating fair value )
• if related to, eg, growth in profit or in earnings per share, then we need to take them into account when estimating fair value as at grant option date”I couldn’t find the statement previously quoted by you “performance benchmarks are ignored when valuing share based payments”
Thanks
You’re welcome, and thanks for the post. As I said in my post, I didn’t have the notes in front of me and was talking from memory.
If the performance is based on market value, that is already take into account within the fair value but if base don, for example, slaes levels, then it appears that it is NOT ignored. To be perfectly honest, I’ll need to digest the Kaplan response over a period of time to consider the implications – on my notes as well as on my understanding
Hmm ok Sir, but I thank you for being patient to address all my queries immediately and comprehensively.
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