There has been a question in my mind which i would like to share with you and would like you to express you opinion on the answers. I came a cross a question on share-based payment recently in which the counterparty had the option to choose equity alternative or cash alternative. Interesting thing in that question was that it contained a liability component not connected with the share price. I asked many of my friends but did not get satisfactory answer. Kindly read this question and share your views regarding the amounts with which equity and liability will be credited at the end of June 2009,10 and 11.
On July 1,2008, PWC company grants its 100 employees a option to receive 1000 shares after 3 years or receive a cash payment of Rs.15,000 each. Exercise price is Rs.8 /share. Grant date fair value can't be determined. Share options can be exercised by June 30,2014. Shares will be issued on July 2 ,2014.
Year ended June ............2009.....2010.....2011.....2012.....2013.....2014
Market value per share.....40........39..........42........40..........41........45
20% exercise the right on June 30,2012
15% exercise the right on June 30,2013
45% exercise the right on June 30,2014
Remaining opt for cash alternative.
What remuneration expense , liability and equity will be recoded a the end of 2008-09,2009-10and 2010-11 ?
Lastly, there is a gap of 3 years after vesting date during which the options can be exercised, since here intrinsic value method is being used so a remeasurement should be done at each repoting date. Will this remeasurement affect the liability which has been fixed by the question or only equity portion shall be remeasured ? When the share options are exercised at the end of 1st year i.e. June 30,2012, will there be any inter account movement for 20% employees who exercise the options ?
Kindly answer these queries, i will be grateful to you as these questions have disturbed me a lot.
Regards
On July 1,2008, PWC company grants its 100 employees a option to receive 1000 shares after 3 years or receive a cash payment of Rs.15,000 each. Exercise price is Rs.8 /share. Grant date fair value can't be determined. Share options can be exercised by June 30,2014. Shares will be issued on July 2 ,2014.
Year ended June ............2009.....2010.....2011.....2012.....2013.....2014
Market value per share.....40........39..........42........40..........41........45
20% exercise the right on June 30,2012
15% exercise the right on June 30,2013
45% exercise the right on June 30,2014
Remaining opt for cash alternative.
What remuneration expense , liability and equity will be recoded a the end of 2008-09,2009-10and 2010-11 ?
Lastly, there is a gap of 3 years after vesting date during which the options can be exercised, since here intrinsic value method is being used so a remeasurement should be done at each repoting date. Will this remeasurement affect the liability which has been fixed by the question or only equity portion shall be remeasured ? When the share options are exercised at the end of 1st year i.e. June 30,2012, will there be any inter account movement for 20% employees who exercise the options ?
Kindly answer these queries, i will be grateful to you as these questions have disturbed me a lot.
Regards
