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Chapter
34 /
Share-Based Payments (l FRS 2)
399
MULTIPLE-CHOI CE QUESTIONS
1. .
Which of the following transactions involving
the Issuance of shares does not come within the defi–
nition of a "share-based" payment under IFRS 2?
(a) Employee share purchase plans.
(b) Employee share option plans.
(c) Share-based payme nt relating to an acquisi–
tion of a subsidiary.
(d) Share appreciation rights.
An swer: (c)
2. Which of the following is true regarding the re–
quirements of IFRS 2?
(a) Private companies are exempt.
(b) "Small" companies are exempt.
(c) Subsidiaries using their parent entity's
shares as consideration for goods and ser–
vices are exemp t.
(d) There are no exemptions from IFRS 2.
Answer: (d)
3. An entity issues shares as consideration for the
purchase of inventory. The shares were issued on
Janu ary I, 20X4. The inventory is eventually sold on
December 31, 20X5. The value of the inventory on
January I, 20X4, was $3 million. This value was un–
changed up to the date of sale. The sale proceeds were
$5 million . The shares issued have a market value of
$3.2 million . Which of the followi ng statements cor–
rectly describe s the accounting treatment of this
share-based payment transaction?
(a) Equity is increased by $3 million, inventory
IS
Increased by $3 million; the inventory
value is expensed on sale on December 31,
20X5 .
(b) Equity is increased by $3.2 million, inven–
tory is increased by $3.2 million; the inven–
tory value is expensed on sale on De–
cember 31, 20X5 .
(c)
~q~ity
is increased by $3 million, inventory
IS
Increased by $3 million; the inventory
value is expensed over the two years to De–
cember 31, 20X5.
(d) Equity is increased by $3.2 million, inven–
tory is increased by $3.2 million; the inven–
tory value is expensed over the two years to
December 31. 20X5 .
Answer: (a)
4.
An entity issues fully paid shares to 200 employ–
ees on December 3 1, 20X4 . Normally shares issued to
employees vest over a two-year period, but these
shares have been given as a bonus to the employees
because of their exce ptional performance during the
year. The shares have a market value of $500,000 on
December 3 1, 20X4 , and an average fair value for the
year of $600 ,000. What amount would be expensed
in the income statement for the above share-based
payment transaction?
(a) $600,000
(b) $500,000
(c) $300 ,000
(d) $250,000
Answer: (b)
S. An entity grants 1,000 share options to each of its
five directors on July I, 20X4. The options vest on
June 30, 20X8 . The fair value of each option on
July I, 2004, is $5, and it is anticipated that all of the
share options will vest on June 30, 20X8. What will
be the acco unting entry in the financial statements for
the year ended June 30, 20X5?
(a) Increase equity $25,000, increase in expense
income statement $25,000 .
(b) Increase equity $5,000, increase in expense
income statement $5,000.
(c) Increase equity $6,250, increase in expense
income statement $6,250.
(d) Increase equity zero, increase in expense in-
come statement zero .
Answer: (c)
6, Entity A is an unlisted entity, and its shares are
owned by two directors. The directors have decided to
issue 100 share options to an employee in lieu of
many years' service . However, the fair value of the
share options cannot be reliably measured as the en–
tity operates in a highly specialized market where
there are no comparable companies. The exercise
price is $10 per share. and the options were grante d
on January I. 20X4, when the value of the shares was
also estimated at $ 10 per share. At the end of the fi–
nancial year, December 3 1, 20X4, the value of the
shares was estimated at $ 15 per share and the options
vested on that date . What value should be placed on
the share options issued to the employee for the year
ended December 3 1, 20X4?
(a) $ 1,000
(b) $ 1.500
(c) $ 500
(d) $ 250
Answer: (c)
7. On June I, 20X4 , an entity offered its employ ees
share options subject to the award being ratified in a
general meeting of the shareholders. The award was
approved by a meeting on September 5, 20X4. The
entit,is year-end is June 30. The emp loyees were to
receive the share options on June 30, 20X6 . At which
date should the fair value of the share optio ns be val–
ued for the purposes of IFRS 2?
(a) June I, 20X4.
(b) June 30, 20X4.
(c) September 5, 20X4.
(d) June 30, 20X6.
Answer: (e)
8. Many shares and most share options are not
traded in an active market. Therefore , it is often diffi–
cult to arrive at a fair value of the equity instruments
being issued. Which of the following option valuation
techniques should
not
be used as a measure of fair
value in the first instance?
(a) Black-Scholes model.
(b) Binomial model.