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hi tutor,
can u plz explain the difference in answers between these 2 questions. In marchant we took the difference
However in PARSLEY we just calculate the pension depending on another five will leave by 31 October 20X5 while the year end is 30/4/x4?
I’m in doubt I hope u clear it from these examples
question marchant (june 14) note 7
On 1 May 2012, Marchant made an award of 8,000 share options to each of its seven
directors. The condition attached to the award is that the directors must remain employed by Marchant for three years. The fair value of each option at the grant date was $100 and the fair value of each option at 30 April 2014 was $110. At 30 April 2013, it was estimated that three directors would leave before the end of three years. Due to an economic downturn, the estimate of directors who were going to leave was revised to one director at 30 April 2014. The expense for the year as regards the share options had not been included in profit or loss for the current year and no directors had left by 30 April 2014.(Answer)
30 April 2013 4 directors × $100 × 8,000 × 1/3 = 106661
30 April 2014 6 directors × $100 × 8,000 × 2/3= (3200000)
____________
2133333Question PARSLEY in Kaplan kit
On 1 November 20X3, Parsley granted 10,000 share options to each of its 100 managers. These options will vest on 31 October 20X5 if the managers are still
employed. Five managers had left the company by 30 April 20X4 and it is expected that another five will leave by 31 October 20X5. The fair value of the share options was $3.10 on 1 November 20X3 and $5.15 on 30 April 20X4. No accounting entries have been posted in relation to this scheme.(answer)
Share options The expense should be based on the number of shares that are expected to vest and the fair value of the options at the grant date. This expense is spread over the vesting period. The expense in the year ended 30 April 20X4 is:
(100 employees – 5 – 5) × 10,000 options × $3.10 fair value × 6/24 = $0.7m.
The correcting entry is:
Dr Admin expenses (P&L) $0.7m
Cr Equity $0.7mHi,
I think the key here is that in Marchant the accounting has been done for the first year of the scheme so we need to account for the second year, which means we need to calculate the fair value at the end of the year and adjust for the movement since the start of the year.
In Parsley, no accounting entries have been made at all in the first year of the scheme, hence why we process the full amount being the fair value at the 30 April 20X4.
Thanks
1) if there were no accounting entries done we have to calculate the share option using the remaining number of directors of last year give even if its after the year end of f/s?
2) how did we know that in marchant they already calculated share opetions for previous year? So we take the difference.
3) Sir i’ve gone through yanong question from june 15 part c
Vesting persiod was till 30/4/14
Why did we calculate the expense and liabilities for 30/4/15 also?
I am so sorry i did post all the questions here again because its all related.
As much as i practise share options questions i get stuck w some issues.
I hope u clarify my conflicts and misunderstanding by answering each of these questions seperately thanks very much for ur efforts.
@zkaay said:
1) if there were no accounting entries done we have to calculate the share option using the remaining number of directors of last year give even if its after the year end of f/s?2) how did we know that in marchant they already calculated share opetions for previous year? So we take the difference.
Hi,
1) You need to calculate the entries using the fair value at the end of the year using the number of directors we expect there to be at the end of the period, and this appears on the SFP. The movement from the start of the year is recognised through profit or loss.
2) You have to read the question carefully. It says in the last sentence in the note.
Thanks
@zkaay said:
3) Sir i’ve gone through yanong question from june 15 part cVesting persiod was till 30/4/14
Why did we calculate the expense and liabilities for 30/4/15 also?
I am so sorry i did post all the questions here again because its all related.
As much as i practise share options questions i get stuck w some issues.
I hope u clarify my conflicts and misunderstanding by answering each of these questions seperately thanks very much for ur efforts.
Hi,
You must read the question very carefully. It states in the last sentence “and would like advice as to how the SARs should have been accounted for from the grant date to 30 April 2015.”
Thanks
Hi,
Why in calculating the cash paid to employees we need to use the intrinsic value of $10.50 instead of fair value of $12 ?Hi,
May I know the double entries for 20X4 and 20X5 as the amount of liabilities and expenses are different because based on the answer sheet, what I understand in 20X4, the double entries would be DR expenses $926250, CR liabilities $1,567,500 which is not balance. Can you clarify my doubt ?In cash settled scheme – cash paid out to employees based on intrinsic value – this will be set out in the rules of the scheme.
If trying to prove P&L:
LIABILITY B/F LESS CASH PAID OUT PLUS P&L EXPENSE (BALANCING FIGURE) = LIABILITY C/F
(Please try and start a new thread for your questions) 🙂
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