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Hello,
Could you please help with the below question:
On 1/1/x1 entity grants 10 employees 100 SARs each, they will receive a cash bonus if they stay until 31/12/x3.
FV of each SAR was £1 on 1/1/x1 and £6 on 31/12/x1.
One employee left in y/e 31/12/x1 and it is expected two other will leave before 31/12/x3.Question: How much expense should be recognised in y/e 31/12/x1?
My answer was £18000 = (10-1) x 1000 x £6 x 1/3 but the model answer was £14000 as it included two employees that may leave before 31/12/x3.
Could you please let me know why do we count them as well?Thank you in advance!
GosiaHi,
The answer is correct because the fair value recognised at each reporting date is based upon the number of employees expected to exercise the option. The expected number will therefore include those employees who have left and also those who we expect to leave as they will not be expected to exercise their rights.
Thanks
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