SHARE-BASED PAYMENTS

CASE 1
On January 1, 2015, ABC granted 30 share options to each of the 1,000 employees. Each grant is conditional upon the
employee remaining in service for five years. The fair value of the share option on the date of grant is P50. On
December 31, 2015, 30 employees left the entity and 170 employees are expected to leave by the end of the vesting
period. On December 31, 2016, 30 employees left the entity and 140 employees are expected to leave by the end of
the vesting period.
On January 1, 2017, the entity repriced the share options by lowering the exercise price. As a result, the fair value of
the share option increased by P10. The modification did not change the vesting period.
On December 31, 2017, 50 employees actually left the entity. ABC anticipated 90 employees to leave by the end of
the vesting period.
Given the information above, compute the following:
1. Compensation expense for 2015.
2. Cumulative compensation 2016.
3. Compensation expense for 2017.
CASE 2
On January 1, 2015, ABC granted 25 share options to each of the 1,500 employees. Each grant is conditional upon the
employee remaining in service for 3 years, allowing each option to be exchanged for a single share at P25. The fair
value of the share option on the date of grant is P20. On December 31, 2015, 90 employees left the entity and 110
employees are expected to leave by the end of the vesting period.
On January 1, 2016, the entity modified the vesting condition resulting to an increase in exercise price to P30 and fair
value of the share options reduces by P5. The modification did not change the vesting period though.
On December 31, 2016, 30 employees left the entity and 90 employees are expected to leave by the end of the
vesting period.
On December 31, 2017, 75 employees actually left the entity.
Given the information above, compute the following:
4.
5.
6.

Compensation expense 2015.

Compensation expense 2016.
Compensation expense 2017.

CASE 3
On January 1, 2015, ABC purchased inventory of P1,000,000. The entity has offered the supplier a choice of
settlement alternatives as follows:

Receive 10,000 shares with par value of P50, valued at P1,100,000 at the date of purchase.

To receive a cash payment equal to the fair value of 8,000 phantom shares on December 31, 2015, with an
estimated fair value of P900,000 at the date of purchase.
The market value of the share on December 31, 2015 is P120, and all inventory items purchased were sold with 50%
mark up. ABC uses perpetual method in accounting for inventory.
7. Determine the total expense ABC has to reflect on its profit or loss statement, ending December 31, 2015,
assuming the supplier has chosen the cash alternative.
CASE 4
ABC Company has granted share options to its employees. The total compensation expense to the vesting date of
December 31, 2016 has been calculated at P6,000,000. The entity has decided to settle the award early on December
31, 2015. The compensation expense charged since the date of grant on January 1, 2013 was P1,500,000 for 2013
and P1,300,000 for 2014. The compensation expense that would have been charged for 2015 is P1,200,000.

8.
9.

What is the compensation expense for 2015?

What would be the compensation expense for 2015, assuming the share options are not exercised but instead, the
entity paid the employees P5,000,000 on December 31,2015?

CASE 5
On January 1, 2014, ABC Company granted its president 50,000 share appreciation rights for past services. These
rights are exercisable immediately and expire on December 31, 2015. On exercise date, the president is entitled cash
for the excess of the share market price over the share market price on the grant date. The president did not exercise
any of the rights during 2014. The market price of the share was P100 on January 1, 2014 and P115 on December 31,
2014. The grantee exercised the rights on December 31, 2015 when the market price was P108.
Answer: the following:
10. Determine the accrued liability on share appreciation on the year 2014.
11. On the year 2015, how much is the net increase/ decrease in net assets?
CASE 6
ABC Co. issued share appreciation rights (SARs) to 40 or its employees. The SARs will vest at the end of 3 years,
provided the employees remain with the company and provided the average revenue growth over the period will
exceed 5%. The share option entitlement of each employee depending upon the average growth rate is:
Average Revenue Growth Percentage
No. of SARs per Employee
Between 5 to 10
1,000
Between 11 and 15
2,000
More than 15%
3,000
On the grant date, each SAR has a fair value of P60. ABC expects an average revenue growth rate of 8% during the 3
year vesting period, and that 16 of its employees will leave before the vesting period ends.
12. Assuming the estimates do not change during Year 1, the compensation expense in Year 1 is
13. At the end of Year 2, average revenue growth projection is 11% and 32 employees are expected to remain in the
entitys employ. The fair value of each SAR is P70. The compensation expense in Year 2 is
14. At the end of Year 3, average revenue growth was 9.5% and 36 employees did not leave the company. The fair
value of each SAR is P80. The cumulative liability on share appreciation right is