Question in Chapter 13 Share based payments – Unusual situations

Dear tutor,

Thank you for the lectures. I have started from Chapter 1 now I’m in Chapter 13.

Just a question in the situation “Employee has a choice as to receiving shares or cash” for share based payments. It seems that the lecture was brief so there shouldn’t be an emphasis on this section during the exam. But I’m just totally lost with regards to the accounting treatment.

Earlier in other sections, I learnt that we account for the SBP expenses differently, as we use different FV values depending if it’s equity-settled or cash-settled. But if an employee has the choice to choose, what happens then? The example states we will recognize the equity component which will be a balancing figure after figuring out the FV of the equity route and FV of the liability route.

How do I calculate the FV of the equity route and the FV of the liability route? Will it be given in the question? Since the expenses will be changing over the years (due to changes in FV, or employee count), how could we calculate the FV of each of the routes in let’s say year 1, when we have no idea what would be the movement in the SOFP in the future years?

Maybe I could re-phrase. Earlier when we only used either cash or equity settled, we look at the movements in the SOFP of either equity or liability to figure out the amount to charge in the SOPL. But if it’s the situation where employee can choose the method, how would we figure out the amount to charge in the SOPL.

Sorry if this question is confusing. My head was totally toasted after the lecture.

Appreciate it if I could get an answer.