IFRS 2 Share-based payments

IFRS 2 SHARE-BASED PAYMENTS

SUGGESTED ANSWERS (TUTORIAL DISCUSISON)

Question 1
Year Expenses Equity in SOFP
X2 20,000x1/4x6 RM30,000 RM30,000
X3 20,000x1/4x6 RM30,000 RM60,000
X4 20,000x1/4x6 RM30,000 RM90,000
X5 20,000x1/4x6 RM30,000 RM120,000

Question 2
Year Expenses Equity in SOFP
X4 80 x 1,000x1/3x6 RM160,000 RM160,000
X5 80 x 1,000x1/3x6 RM160,000 RM320,000
X6 80 x 1,000x1/3x6 RM160,000 RM480,000

Question 3
Year Expenses Equity in SOFP
X2 35 x 5,000x1/3x6 RM350,000 RM350,000
X3 (38 x 5,000x2/3x6)-350,000 RM410,000 RM760,000
X4 (40 x 5,000x6)-760,000 RM440,000 RM1,200,000

Question 4
Year Expense charged Equity in
in SOCI SOFP
RM RM
X1 2,000 options x 80 x (RM18- 320,000 320,000
RM12) x1/3

X2 2,000 options x 80 x (RM24- 960,000 1,280,000

RM12 x2/3) – RM320,000

X3 2,000 options x 84x RM32- 2,080,000 3,360,000

RM12) – RM1,280,000

X4 2,000 options x 84 x (RM30- (336,000) 3,024,000

RM32)
2,000 options x 2 x (RM30- 72,000 3,096,000
RM12)

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IFRS 2 Share-based payments

Question 5
Step 1
Calculate the fair value of the equity and debt alternatives.
Alternatives Fair value Calculation
Equity alternative 35,000 5,000 shares x 7
Cash alternative 32,000 4,000 phantom shares x 8
The fair value of the equity component is RM3,000.

Step 2
Determine the expenses for each year.

Year ended Expense Liability Equity Calculation

RM RM RM
31.12.x1 12,000 12,000 4,000x9x1/3
1,000 1,000 RM3,000 x1/3

31.12.x2 20,000 32,000 (4,000 x12x2/3)-RM12,000

1,000 2,000 RM3,000 x1/3

31.12.x3 40,000 72,000 (4,000 x18)-RM32,000

1,000 3,000 RM3,000 x1/3

Question 6
a. Shares issued to the directors on 1.1.x6 as part of the purchase consideration has to be
accounted for under FRS 3 Business Combinations. The share capital will be increased
by RM10 million and share premium RM10 million.
b. Contingent consideration
The 10,000 shares per director could be considered as compensation and so can be
treated under FRS 2 Share Based Payments. The share value of RM2 at grant date will
be used to calculate the share based payment which will amount to 10,000 x 5 x RM2
= RM100,000. This will be charged as expenses in the profit or loss and recognise the
corresponding amount in equity.
c. Bonus payment
It is accounted for under FRS 2 and the value taken is at the grant date which is also
the vesting date, being RM3 per share. The RM3 million is charged to profit or loss
and included in equity.
d. Choice of shares or cash
Share value will be RM3.5 x 50,000 = RM175,000
Cash alternative will be 40,000 x RM4 = RM160,000
The difference between these two values is equity ($15,000).
As the share based payment is unconditional, the staff cost of RM175,000, liability of
RM160,000 and equity of RM15,000 are to be recognised on 31 December year x6.
The liability has to be remeasured at the end of year 7, but not the equity.

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IFRS 2 Share-based payments

Question 7
a. Inventory is measured at fair value. A liability for (1.3m x $3.50) of $4.55million and
equity of $0.45 is recognised.
At 31 May, the liability is increased to (1.3 m x $3.65) $4.745 million. The difference
is charged in the income statement.
The profit for the year has reduced by $0.195 million and EPS will be lower by1.95
cents.

b. The share-based payment is to be treated as a compound and is vested. Fair value of

the share alternate less liability equals the equity component.
50,000 x 2.5 = $125,000
Liability = 30,000 x $3.65 = $109,500
Equity component = $125,000 - $109,500 = $15,500
Profit will reduce by RM125,000.
EPS will reduce by 1.25 cents.

c. The share–based payment is not vested and the cost has to be apportioned over the
vesting period of 2 years.
In the current year the amount charged in the income statement will be:
(10,000-500-600) x 200 x$1 x ½ = $890,000.
Profit is reduced by $890,000 and EPS will be lower by 8.9 cents.