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In some qs the bpp book has used this formulation to figure out tye yr end liability:
(ppl-estimated no.of ppl who will leave)*yrs lapsed*fair valueAnd sometimes it has used this
(ppl-actually who left-estimated no.of ppl to leave)*yrs lapsed*fair valueSir pls tell me whether the difference is for equity settled and cash settled transactions or what?
It depends where you are in the year. Before the year end – so typically at the inception of the scheme – we don’t know how many are going to leave, so we have to estimate. At the end of the year, we know how many have left after year 1 and we can estimate how many more will leave in the remainder of the life of the scheme.
At end year 2, we know how many have left, but still have to estimate the number leaving in the next twelve months
But in the bpp book despite the qs telling how many left,theyre taking out only the estimated ones and in the cash settled qs they deduct the ones who have left n are expected to leave?
Is it that the treatment of cash n equity settled is different?No, they’re not different.
Check to make sure that when BPP are accounting for the estimated leavers, this accounting entry is being put through at the start of the year.
Then, at the end of year one, we know how many have left and we can estimate how many more are likely to leave during year two.
So, using the best information available to us and our best estimates of the future, we can adjust the original calculations throughout the life of the grant
Hi, I have the same confusion, only with Kaplan. I tried looking for a difference in terminology, but both type of questions (i.e. equity settled and cash settled) use the wording “during the year…”. However, for equity settled payments, they use estimates, whereas for cash settled payments, they are using both the estimates and the actual number of employees that have left in calculations. What am I missing?
Thanks in advance!
I’m sorry – that I cannot answer. Maybe you could try contacting Kaplan and see if they are able to throw some light on it. If they can, may I ask you to let me and others know what their explanation is?
I have contacted Kaplan in this regard. Will post their response here as soon as they get back to my query. Thanks 🙂
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