IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

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Wiley IFRS: Practical Implementation Guide and Workbook

(d) Intrinsic value.

Answer: (d)

9. Ashleigh, a public limited company, has granted

share options to its employees with a fair value of $6

million. The options vest in three years' time. The

Monte-Carlo model was used to value the options,

and these estimates had been made:

• Grant date (January

I .

20X4): estimate of em–

ployees leaving the entity during the vesting

period-S%

• January I, 20XS: revision of estimate of em–

ployees leaving to 6% before vesting date

• December 3 1, 20X6: actual employees leaving

A. What would be the expense charged in the

income statement in

Year to December 3 1. 20X4 ?

(a) $6 million.

(b) $2 million.

(d) $S.70 million.

Answer: (c) ($6 mill ion x 95% x 1/3)

B. Year to December 31. 20XS?

(a) $1.90 million.

(b) $1.88 million.

(d) $3.78 million.

Answe r : (b) ($6 mill ion x 94% x 2/3 - $1.90

million)

Year to Decembe r 31. 20X6?

(a) $1.90 million.

(b) $1.88 million.

(d) $1.92 million.

Answer : (d) ($6 mill ion x 95% - $3.78 million)

10. Joice. a public limited company. has granted

share options to its employees prior to the date from

which IFRS 2 became applicable (November 7.

2002). The company decided after the issuance of

IFRS 2 to reprice the options. The original exercise

price of $20 was repriced at $ IS per option. IFRS 2

would require the company to

(a) Apply the Standard to the share options

from the original grant date and ignore the

repricing.

(b) Apply the Standard to the share options

from the original grant date. taking into ac–

count the repriced award.

only.

(d) Ignore the Standard for the whole award of

share options.

Answer: (c)

11. An entity has granted share options to its em–

ployees. The total expense to the vesting date of De–

cember 31, 20X6. has been calculated as $8 million.

The entity has decided to settle the award early. on

December 3 1. 20XS. The expense charged in the in–

come statement since the grant date of January I.

20X3 . had been year to December 3 1. 20X3. $2 mil–

lion, and year to December 3 1. 20X4. $2.1 million.

The expense that would have been charged in the year

to December 3 1. 20XS. was $2.2 million. What would

be the expense charged in the income statement for

the year December 3 1. 20XS?

(a) $2.2 million.

(b) $8 million.

(d) $2 million.

Answer: (c)

12. Elizabeth. a public limited company. has granted

100 share appreciation rights to each of its 1.000 em–

ployees in Janu ary 20X4. The management feels that

as of December 31, 20X4. 90% of the awards will

vest on Decemb er 3 1. 20X6. The fair value of each

share appreciation right on December 3 1. 20X4. is

$ 10. What is the fair value of the liability to be re–

corded in the financial statements for the year ended

December 3 1, 20X4?

(a) $300.000

(b) $ 10 million

(d) $90.000

Answer: (a) (100 x 1000 x 90% x $10 x 1/3)

13. Jay. a public limited company, has granted 20

share appreciation rights to each of its SODemployees

on January I. 20X4. The rights are due to vest on

December 31. 20X7, with payment being made on

December 3 1. 20X8. Assume that 80% of the awards

vest. Share prices are

January I 20X4

December 31. 20X4

December 31. 20X7

December 3 1. 20X8

What liability will be recorded on December 31.

20X7. for the share appreciation rights?

(a) $ 60.000

(b) $210.000

(d) $ IS0.000

Answer: (c) [20 x 500 x 80% x ($21 - $15)]

14. How should the settlement of the transaction be

accounted for on December 3 1. 20X8?

(a) Payment to employees of $32.000. no gain

recorded.

(b) Payment to employees of $ 16.000. gain of

$32.000 is recorded.

recorded.

(d) Payment to employees of $32.000, gain of

$ 16.000 is recorded.

Answer: (d) [20 x 500 x 80% x ($19 - $15)] th at

is, $32,000

15. Doc. a public limited company. has purchased

inventory of $ 100,000. The company has offered the

supplier a choice of settlement alternatives. The alter-