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 DE LA SALLE UNIVERSITY MANILA
RVR – COB DEPARTMENT OF ACCOUNTANCY
REVDEVT 2nd Term AY 15-16

Theory of Accounts
TOA Quizzer 7 Prof. Francis H.Villamin

IFRS 2 – SHARE-BASED PAYMENT

1. These are transactions in which the entity receives goods or services as consideration for equity
instruments of the entity, including shares and share options.
a. Equity settled share-based payment transactions
b. Cash settled share-based payment transactions
c. Equity payment transactions
d. Cash payment transactions

2. These are transactions in which the entity acquires goods or services by incurring liabilities to the
supplier of those goods or services for amounts that are based on the price of the entity’s shares and
other equity instruments.
a. Equity transactions
b. Cash settled share-based payment transactions
c. Purchase transactions
d. Cash payment transactions

3. It is an arrangement that provides for an automatic grant of additional share options whenever the option
holder exercises previously granted options using the entity’s shares, rather than cash, to satisfy the
exercise price
a. Reload feature
b. Reload option
c. Share option
d. Equity option

4. It is a new share option granted when a share is used to satisfy the exercise price of a previous share
option.
a. Reload option
b. Share option
c. Share warrants
d. Call option

5. Entity X has entered into a contract with entity Y. Y will supply X with a range of services. The payment
for those services will be in cash and based upon the price of the X’s ordinary shares on completion of
the contract. In accordance with IFRS 2, what type of share-based payment transaction does this
represent?
a. Asset settled share-based payment transactions
b. Liability settled share-based payment transactions
c. Cash settled share-based payment transactions
d. Equity settled share-based payment transactions

6. Equity settled share based transactions are those transactions in which the entity receives goods or
services
a. as a consideration for equity instruments of the entity including share options.
b. by incurring liability to a transfer cash or other assets to the supplier of the goods or services for
amounts that are based on the price of the entity’s shares or other equity instruments.
c. and the terms of the arrangement provide either the entity or supplier of goods or services with a
choice of whether the entity settles the transaction in cash or by issuing equity instruments.
d. without consideration.
 TOA Quizzer 7 Share-Based Payment Page 2

7. For equity settled share based payment transactions, the entity shall measure the goods or services
received and the corresponding increase in equity
I. Directly at fair value of the goods or service received.
II. Indirectly, by reference to the fair value of the equity instruments granted, if the fair value of the
goods or services received cannot be estimated reliably.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

8. For cash settled share-based transactions, an entity shall measure the goods or services received and
the liability incurred at the
a. fair value of the goods and services received.
b. fair value of the liability.
c. either the fair value of the goods or services received or the fair value of the liability.
d. neither the fair value of the goods or services received, nor the fair value of the liability.

9. For cash settled share-based payment transactions, until the liability is settled, the entity is required to
remeasure the fair value of the liability of each reporting date and the date of settlement and any
changes in fair value are
a. Recognized in profit or loss for the period
b. Included in retained earnings
c. Treated as component of equity
d. Not recognized

10. If the share-based payment transactions provide a choice whether the entity settles in cash or issues
equity instruments, the entity is required to account for the transaction as
I. Cash settled share-based payment transaction if and to the extent that the entity has incurred a
liability to settle in cash or other assets.
II. Equity settled share-based payment transaction if and to the extent that no liability has been incurred
by the entity.
a. I only
b. II only
c. Either I or II
d. Neither I nor II

11. It is the date on which the entity and another party agree to a share-based payment arrangement, being
when the entity and the counter party have shared understanding of the terms and conditions of the
arrangement.
a. Grant date
b. Measurement date
c. Exercise date
d. Balance sheet date

12. Measurement date is the date on which the fair value of the equity instrument granted is measured.
What is the measurement date for share-based payment transactions?
I. For transactions with employees and others providing similar services, the measurement date is the
grant date.
II. For transactions other than employees, the measurement date is the date the entity obtains the
goods or the counter party renders service.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

13. For purposes of share-based payment transactions, a reload feature is

a. An arrangement that provides for an automatic grant of additional share options whenever the option
holder exercises previously granted options using the entity’s shares, rather than cash, to satisfy the
exercise price.
b. A new share option is granted when a share is used to satisfy the exercise price of a previous share
option.
c. A contract that gives the holder the right but not the obligation to subscribe to the entity’s shares at a
fixed or determinable price for a specified period of time.
d. A contract that evidences a residual interest in the assets of an entity after deducting all its liabilities.
 SHARE BASED PAYMENTS – Problems
PROBLEM 1:

Irish Company granted 10,000 share options to each of its five directors on January
1, 2016. The options vest on January 1, 2020. The fair value of each option on January 1. 2016 is 50 and it is
anticipated that all of the share options will vest on January 1, 2020.
What amount should be reported as increase in expense and equity for the year ended December 31, 2016?
a. 750,000 c. 625,000
b. 500,000 d. 125,000
PROBLEM 2:

On January 1, 2016, Oak Company granted share options to certain key employees as additional compensation. The
options were for 100,000 ordinary shares of 10 par value at an option price of 15 per share. Market price of this share
on January 1, 2016 was 20. The fair value of each share option on January 1, 2016 is 8. The options were exercisable
beginning January 1, 2016 and expire on December 31, 2016 . On April 1, 2016, all share options were exercised.

What amount of compensation expense should be reported in 2016?

a. c. 200,000800,000
b. 500,000 d. 125,000

PROBLEM 3:

On January 1, 2016, Greece Company granted an employee an option to buy 20,000 shares for 40 per share, the
option exercisable for three years from January 1, 2018. Using the fair value option pricing model, total compensation
expense is determined to be 240,000. The employee exercised the option on September 1, 2018, and sold the 20,000
shares on December 1, 2018. The service period is for two years beginning January 1, 2016.

What amount should be recognized as compensation expense for 2016?

a. 240,000 c. 160,000
b. 120,000 d. 80,000

PROBLEM 4:

Esmeralda Company issued fully paid shares to 200 employees on December 31, 2016. 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 exceptional performance during the year. The shares have a market value of 500,000 on December 31, 2016 and
an average fair value of 600,00 for the year.

What amount should be expensed for this share-based payment transaction?

a. 600,000 c. 300,000
b. 500,000 d. 250,00

PROBLEM 5-6:

Roxanne Company has granted share options to the employees. The total compensation expense to the vesting date of
December 31, 2019 has been calculated at 8,000,000.
The entity has decided to settle the award early on December 31, 2018.
The compensation expense charged since the date of grant on January 1, 2016 was 2 ,000,000 for 2016 and 2,100,000
for 2017.
The compensation expense that would have been charged in 2018 was 2,200,000.
PROBLEM 5: What is the compensation expense for 2018?

a. 2,200,000 c. 3,900,000
b. 8,000,000 d, 2,000,000
 PROBLEM 6: What is the compensation expense for 2018 if the share options are not exercised but instead
the entity paid 7,500,000 to the employees?

a. 2,200,000 c. 3,400,000
b. 3,900,000 d. 7,500,000

PROBLEM 7:

Ivy Company, an unlisted entity, decided to issue 1,000 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 entity operates in a highly specialized
market where there are no comparable entities. The exercise price is 100 per share and the options were granted on
January 1, 2016 when the value of the shares was also estimated at 100 per share. On December 31, 2016, the value
of the shares was estimated at 150 per share and the options vested on that date.

What value should be placed on the share options issued for the year ended December 31, 2016?

a. 100,000 c. 50,000
b. 150,000 d. 25,000

PROBLEM 8:

Elizabeth Company granted 100 share appreciation rights to each of the 1,000 employees on January 2016. The entity
estimated that 90% of the awards will vest on December 31, 2018. The fair value of each share appreciation rights on
December 31, 2016 is 10.

What is the accrued liability on December 31, 2016?

a. 300,000 c. 100,000
b. 900,000 d. 90,000

PROBLEM 9-11:

On January 1, 2016, Kristen Company established a share appreciation rights plan for the executives. The plan entitled
them to receive cash at any time during the next four years for the difference between the market price of the ordinary
share and a pre-established price of 20 on 60,000 share appreciation rights. On December 31 , 2018, 20,000 SARs are
exercised by the executives.

Market price

January 1, 2016 25 per share

December 31, 2016 28 per share
December 31, 2017 35 per share
December 31, 2018 30 per share
PROBLEM 9: What amount of compensation expense should be recognized for 2016?

a. 480,000 c. 300,000
b. 120,000 d. 180,000
PROBLEM 10: What amount of compensation expense should be recognized for 2017?

a. 900,000 c. 105,000
b. 420,000 d. 225,000

PROBLEM 11: What amount should be recognized as accrued liability for share appreciation rights on
December 31, 2018?

a. 600,000 c. 400,000
b. 300,000 d. 200,000
PROBLEM 12:
On January 1, 2016, Morey Company granted Dean, the president, 20,000 share appreciation rights for past services.
These rights are exercisable immediately and expire on January 1, 2018. On exercise, Dean is entitled to receive cash
for the excess for the share market price on the grant date. Dean did not exercise any of the rights during 2016. The
market price of Morey’s share was 30 on January 1, 2016 and 45 on December 31, 2016.

As a result of the share appreciation rights, what amount should be recognized as compensation expense for 2016?

a. 0 c. 300,000
b. 100,000 d. 600,000

PROBLEM 13:

Wolf Company granted 30,000 share appreciation rights which entitled key employees to receive cash equal to the
difference between 20 and the market price of the share on the date each right is exercised. The service period is 2016
through 2018, and the rights are exercisable in 2019. The market price of the share was 25 and 28 on December 31,
2016 and 2017, respectively.

What amount should be reported as liability under the share appreciation rights on December 31, 2017?

a. 0 c. 160,000
b. 130,000 d. 240,000
PROBLEM 14-15:
Sarah Company has granted share options to the employees. The total compensation expense to the vesting date of
December 31, 2019 has been calculated at 5,000,000.
The entity has decided to settle the award early on December 3, 2018.
The compensation expense charge since the date of grant on January 1, 2016 was 1 ,000,000 for 2016 and 1,200,000
for 2017.
The compensation expense that would have been charged in 2018 was 1,800,000.
PROBLEM 14: What is the compensation expense for 2018?

a. 2,400,000 c. 2,600,000
b. 2,800,000 d. 2,500,000

PROBLEM 15: What is the compensation expense for 2018 if the share options are not exercised but instead the entity
paid 4,500,000 to the employees?

a. 2,000,000 c. 2,500,000
b. 2,900,000 d. 2,300,000
SHARE-BASED PAYMENTS – Theories
1. It is the difference between the fair value of the 3. What is the date on which the fair value of the
shares to which the counterparty has the right to equity instrument granted is measured?
subscribe and the price the counterparty is a. Measurement date
required to pay for those shares. b. Grant date
a. Fair Value c. End of reporting period
b. Intrinsic Value d. Exercise date
c. Market Value
d. Book Value 4. It is the contract that gives the holder the right,
but not the obligation, to subscribe to the entity’s
2. What is the date on which the entity and another shares at a fixed or determinable price for a
party agree to a sharebased payment specified period of time.
arrangement, being when the entity and the a. Share option
counterparty have a shared understanding of b. Share warrant
the terms and conditions of the arrangement? c. Share appreciation right
a. Grant date d. Share split
b. Measurement date
c. Exercise date
d. End of reporting period
5. If the entity has the choice of settlement in a
“cash and share alternative”, the entity shall
account for the instrument initially as
a. Equity only
b. Liability only
c. Partly equity and partly liability
d. Either equity or liability but not both
6. A cash settled share-based payment transaction
increases which of the following?
a. A current asset
b. A non-current asset
c. Equity
d. A liability
7. What is the measurement date for a share-
based payment to employees that is classified
as a liability?
a. The service inception date
b. The grant date
c. The settlement date
d. The end of the reporting period
8. These are transactions in which the entity
receives goods or services as consideration for
equity instruments of the entity, including shares
and share options.
a. Equity settled share-based payment
transactions
b. Cash settled share-based payment
transactions
c. Equity payment transactions
d. Cash payment transactions
9. If the share options do not vest until the
employee completes a specified service period,
the compensation is
a. Not recognized as expense
b. Recognized as expense immediately
c. Recognized as expense over the
service or vesting period
d. Recognized expense over a reasonable
period not exceeding 10 years
10.The entity has issued a range of share options to
employees. What type of share-based payment
transaction does this represent?
a. Asset settled share-based payment
transactions
b. Equity settled share-based payment
transactions
c. Cash settled share-based payment
transactions
d. Liability settled share-based payment
transactions
11.These are transactions in which the entity
acquires goods or services by incurring
liabilities to the supplier of those goods or
services for amounts that are based on the
price of the entity’s shares and other equity
instruments
a. Equity transactions
b. Cash payment transactions
c. Purchase transactions
d. Cash settled share-based payment
transactions
12.If the share-based payment transactions
provides that the employees have the right to
choose the settlement whether in cash or
shares, the entity is deemed to have issued
a. A compound financial instrument
b. An equity instrument
c. A liability instrument
d. Either an equity instrument or a liability
instrument but not both
13.An entity has entered into a contract with another
entity which will supply a range of services. The
payment for those services will be in cash and
based upon the price of the entity’s ordinary
shares on completion of the contract.
What type of share based payment transaction
does this represent?
a. Asset settled share-based payment
transactions
b. Liability settled share-based payment
transactions
c. Cash settled share-based payment
transactions
d. Equity settled share-based payment
transactions
14.Which of the following statements in relation to
the cash settled share-based payment
transactions is true?
I. The fair value of the liability shall be
remeasured at the end of each
reporting period.
II. The fair value of the liability shall be
remeasured at the date of settlement.
a. I only
b. II only
c. Both I and II
d. Neither I and II
15.Which of the following statements in relation to
share options granted to employees in
exchange for their services is true?
I. The services received shall be a. I only
measured at the fair value of the b. II only
employees’ services. c. Both I and II
II. Fair Value shall be measured at the d. Neither I and II
date the options vest.
 Problem 24-11(AICPA Adapted)

On January 1, 2020, Doro Company granted an employee an option to purchase 20,000 ordinary shares
with P5 par value at P20 per share.
The option became exercisable on December 31, 2021,after the employee completed two years of
service. The fair value of the share option is P15. The option was exercised on January 10,2022.

The share prices are P30 on January 1, 2020, P50 on December 31,2020, and P60 on January 10,2022.

What is the compensation expense for 2020?

a.150,000
b.100,500
c.300,000
d.400,000

Problem 24-12 (AICPA Adapted)

At the beginning of current year, Cancun Company granted share options to key employees for the
purchase of 40,000 shares at P25 per share. The options are intended to compensate employees for the
next two years.

The option's are exercisable within a four-year period after vesting by grantees still in the employ of the
entity.

The market price of the share was P40 at the date of grant. The fair value of each share option is P20.
No share options were terminated during the current year.

What amount should be recognized as compensation expense for the current year?
a. 600,000
b. 300,000
C. 800,000
d. 400,000
 Problem 24-13(IAA)
At the beginning of current year, Red Company issued share options for 200,000 shares to a
division manager. The options have an estimated fair value of P6 each.
To provide additional incentive for managerial achievement, the options are not exercisable unless
divisional revenue increases by 6% in three years.
The entity initially estimated that it is probable the goal will be achieved.
What is the compensation expense for the current year?

a. 800,000
b. 600,000
C. 400,000
d. 0

Problem 24-14(IAA)
At the beginning of current year, Gray Company granted share options to key employees for the
purchase of 80,000 ordinary shares at P25 per share. The options are intended to compensate
employees for the next two years.
The options are exercisable within a four-year period after vesting by the grantees still in the employ of
the entity.

No options were terminated during the current year, but the entity does have an experience of 4%
forfeitures over the life of the share options.

The market price of the share was P31 at the date of the grant. The entity used the Binomial pricing
model and estimated the fair value of each share option at P10.

What amount should be reported as compensation expense for the current year?

a.307,200
b.320,000
c.384,000
d.400,000

Problem 24-15 (IFRS)

Francesca Company decided to issue 1,000 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 entity operates in a highly
specialized market where there are no comparable entities.
The exercise price is P100 per share and the options were granted at the beginning of curernt year,when
the value of the shares was also estimated at P100 per share.
At the end of the current financial year, the value of the shares was estimated at P150 per share and the
options vested on that date.
 What value should be'placed on the share options issued for the current year?
a. 100,000
b. 150,000
C. 50,000
d. 25,000

Problem 24-18 (IFRS)

On January 1, 2018, Kristel Company granted share options to the employees. The total compensation
expense to the vesting date on December 31, 2021 had been calculated at P6,000,000.

The entity decided to settle the award early on December 31,2020.

The compensation expense charged since the date of grant was P1,500,000 for 2018 and P1,300,000
for 2019. The compensation expense that would have been charged for 2020 is P1,200,000.

What amount should be recognized as compensation expense for 2020, assuming the share options are
not exercised but instead, the entity paid the employees P5,000,000 on December 31,2020?

a. 5,000,000
b. 2,200,000
C. 3,200,000
d. 0

Problem 24-19(IAA)
Under the executive share option plan, Marien Company granted options on January 1, 2020 that permit
executives to purchase 15,000 P100 par ordinary shares within the next eight years but not before
December 31, 2022.
The exercise price is the market price of the shares on the date of grant.
The fair value of the share option estimated by an appropriate option pricing model is P40.
No forfeitures were anticipated. However unexpected turnover during 2021 caused the forfeiture of 5% of
the share options.
What is the compensation expense for 2021?
a. 200,000
b. 190,000
C. 180,000
d. 0

Problem 24-20(IAA)
On January 1, 2020,Green Company had issued executive share options permitting executives to buy
40,000 shares for P25 per share.
The vesting schedule is 20% the first year, 30% the second year, and 50% the third year(graded-vesting).
Vesting date Amount vesting Fair value per option
December 31, 2020 20%
10December 31,2021 30%
15December 31,2022 50%
20
Assuming the entity used the straight line method,what amount of compensation expense should be
recorded in 2020?

a. 660,000
b.180,000
c.220,000
d.400,000

Problem 24-22 (AICPA Adapted)

On January 1, 2020,Jeanne Company granted the president compensatory share options to buy 5,000
shares of P100 par value.
The options call for a price of P120 per share and are exercisable for four years following the grant
date. The president exercised the options on December 31,2020.
The market price of the share was P150 on January' 1,2020 and P180 on December 31, 2020. The fair
value of a similar share option with the same terms was P60 on the grant date.

1. What is the compensation expense for 2020?

a. 300,000
b. 100,000
c. 150,000
d. 75,000

2. By what net amount should shareholders' equity increase as a result of the grant and exercise of the
options?
a. 600,000
b.900,000
c.500,000
d.750,000

problem 24-23(AICPA Adapted)

Gabriel Company's employee share purchane plan apecifien that for every P1 withheld from employee'a
wagen for the purchase of Gabriel's ordinary ahares, Cabriel Company contributes P2.
The shares are purchased from Gabriel Company's treasury shares at market price on the date of
purchase.
During the current year, the employee witholding was P350,000,the market value of 150,000 shares
issued was P1,050,000 and the carrying amount of treasury shares issued was P900,000.

What amount should be recognized as expense in the current year for the share purchase plan?

a. 1,050,000
b. 900,000
C. 700,000
d. 550,000

Problem 24-24(IFRS)

Emerald Company issued fully paid shares to 200 employees at the end of current year. 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 exceptional performance during the year.

The shares have a market value of P500,000 at current year-end and an average fair value of P600,000
for the year.

What amount should be expensed for the share-based payment transaction?

a.600,000
b.500,000
c.300,000
d.250,000

Problem 24-25(IAA)
On June 30, 2020, Newman Company granted compensatory share options for 30,000 P20 par value
ordinary shares to certain key employees. The market price of the share on that date was P36 and the
option price was P30.
The Black-Scholes option pricing model measured the total compensation expense to be P5,400,000.
The options are exercisable beginning January 1, 2023, provided the key employees are still in entity's
employ at the time the options are exercised. The options expire on June 30,2024.
On January 15,2023,when the market price of the share was P42, all 30,000 options were exercised.

What amount of compensation expense should be recorded for 2022?

a. 2,160,000
b. 2,700,000
c.5,400,000
d. 0
 Problem 24-26(IAA)
On January. 1, 2020, Greece Company granted an employee an option to buy 20,000 shares for P40 per
share, the option exercisable for three years from January 1, 2022.The service period is for two years
beginning January 1, 2020.
Using a fair value option pricing model, total compensation expense is determined to be P240,000.

The employee exercised the option on September 1, 2022, and sold the 20,000 shares on December 1,
2022.

What amount should be recognized as compensation expense for 2020?

a.' 240,000
b. 120,000
C. 160,000
d. 80,000

Problem 24-28(IFRS)
On January 1, 2020, Paranoid Company granted to a senior executive 30,000 share options,
conditional upon the executive's remaining in the entity's employ until December 31, 2022. The par value
per share is P50. The exercise price is P100.
However, the exercise price drops to P80 if the entity's earnings increase by at least an average of
10% per year over the three-year period.
The entity estimated that the fair value of the share option is P30 if the exercise price is P80.
If the exercise price is P100, the fair value of the share option is P25.
During 2020 and 2021, the earnings increased by 11% and 12% respectively. Howevër, during 2022, the
earnings increased only by 4%.
1. What is the compensaton expense for 2020?
a. 900,000
b. 450,000
C. 300,000
d. 0

2. What is the compensation expense for 2021?

a.900,000
b. 600,000
c.300,000
d.150,000

3. What is the compensation expense for 2022?

a.300,000
b. 600,000
c.150,000
 d.750,000

4. What is the share premium upon exercise of the share options on December 31,2022?
a. 2,250,000
b.1,500,000
c.1,650,000
d. 900,000

Problem 24-29(IFRS)
on January 1,2020,Nova Company granted share options to each of the 300 employees working in the
sales department. The option price in P80 and the par value in P50 per share.
The share options vest at the end of a three-year period provided that the employees rémain in the
entity's employ and provided the volume of sales will increase by 10% per year.

The fair value of each share option on grant date is P30.If the sales increase by 10%, each employee will
receive.200 share options.

If the sales increase by 15%, each employee will receive 300 share options.

On December 31, 2020,the sales increased by 10%,and no employees have left the entity.

On December 31, 2021, sales increased by 15% and no employees have left.

On December 31, 2022, the sales increased by 15% and 50 employees left the entity.

1. What is the compensation expense for 2022?

 a.1,200,000
b. 2,250,000
C. 900,000
d. 450,000

2. What is the share premium upon exercise of the share options on December 31,2022?

a. 4,500,000
b.2,250,000
c. 2,700,000
d.4,950,000

Problem 24-30(IFRS)
On January 1,2020,Alterra Company granted 60,000 share options to employees. The share
options will vest at the end of three years provided the employees remain in service until then. The option
price is P60 and the par value per share is P50.

At the date of grant, the entity concluded that the fair value of the share options cannot be
measured reliably.

The share options have a life of 4 years which means that the share options can be exercised within
one year after vesting.

The share prices are P62 on December 31,2020,P66 on December 31, 2021, P75 on December
31,2022 and P85 on December 31, 2023. All share options were exercised on December 31,2023.

1. What is the compensation expense for 2022?

a. 120,000
b. 240,000
C. 200,000
d. 660,000

2. What is the compensation expense for 2023?

 a.900,000
b. 600,000
c.660,000
d.450,000

3. What is the share premium upon exercise of the share options on December 31,2023?
a. 2,100,000
b.1,500,000
C. 600,000
d. 900,000

problem 24-31 Multiple choice(PFRS 2)

1.These are transactions in which the entity receives gooda or services as consideration for equity
instruments.
a. Equity settled share-based payment transactions
b. Cash settled share-based payment transactions
C. Equity payment transactions
d.Cash payment transactions

2.The total compensation expense in a share option plan normally is measured at

a. Fair value of share options on date of grant
b. Fair value of share options on date of exercise
C. Intrinsic value of share options on date of grant
d. Intrinsic value of share options on date of exercise

3. It is the difference between the fair value of the shares to be subscribed and the price required to be
paid for those shares.

a. Fair value
b. Intrinsic value
C. Market value
d. Book value
4.The date on which total compensation expense is computed in a share option plan is

a. Date of grant
b. Date of exercise
c. Date when the option price exceeds the market price
d. Date when the market price exceeds the option price

5.When issuing share options, which of the following factors is most relevant in determining the
accounting treatment?

a. The par value of the shares issued

b. The market value of the shares issued
c. The authorized number of shares
d. Whether the share options are issued in lieu of salary

6.For transactions with employees, the fair value of the equity instrument granted is measured
on
a. Exercise date
b. Grant date
c. End of reporting period
d. Beginning of the year of grant
7.It is a contract that gives the holder the right, but not the obligation, to subscribe to the entity's
shares at a fixed or determinable price for a specified period of time.

a. Share option
b. Share warrant
C. Share appreciation right
d. Share split

8.In what circumstances is compensation expense immediately recognized under a share option
plan?
a. In all circumstances
b. In circumstances when the options are exercisable within two years for services rendered.
c. In circumstances when the options are immediately exercisable.
d. In no circumstances.

9.Compensation expense from a share option is generally

a. Recognized in the period of exercise.
b. Recognized in the period of the grant.
c. Allocated to the periods benefited by the employee's required service.
d. Allocated over the periods of the employee's service life to retirement.

10. If there is an acceleration of vesting, any payment made to the employees on the settlement of the
grant shall be
a. Accounted for as repurchase of equity interest.
b. Recognized in retained earnings.
c.Recognized as other comprehensive income.
 d. Accounted for as repurchase of equity interest and any excess payment over the fair value of
share options shall be recognized as expense.

problem 24-32 Multiple choice (IFRS)

1. How is compensation expense measured for equity settled share-based payment transaction?
a. Use the normal hourly rate of employees.
b.Measure, the intrinsic value of share options.
C. Measure the fair value of share options using an option pricing model.
d.Measure the difference between the market price and the fair value of share options.
2.Which option valuation technique should not be used as a measure of fair value in the first instance?
a. Black-Scholes model
b. Binomial model
C.Monte-Carlo model
d. Intrinsic value

3. Share options are what type of share-based payment transaction?

a. Asset-settled share-based payment transaction

b. Equity-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Liability-settled share-based payment transaction

4.Which statement is true in relation to share options?

a.The services received shall be measured at the fair. value of the employees' services.
b. Fair value shall be measured at the date of vesting.
c. Fair value shall be measured at the date of exercise.
d.All of these statements are not true.

5. What interest rate is used to discount both the exercise price of the option and the future dividend
stream?

a. The entity's known incremental borrowing rate

b.The current market rate in the industry
c. The risk-free interest rate
d. Any rate that entities can justify as being reasonable

Problem 24-33 Multiple choice(IAA)

1. The compensation associated with share option plan is

a. The book value of a share times the number of options

b. The estimated fair value of the options
c. Allocated to expense upon expiration
d. Recorded as expense on the date of grant

2. The most important objective for share options is

a. Measuring the compensation expense during the service period.

 b. Measuring the fair value.
c. Disclosing increases or decreases in the share options.
d. Recognition of services rendered.

3. Share options should be reported as expense

a. Using the intrinsic value method

b. Using the fair value method
c. Using the fair value or the intrinsic value method
d. Only on rare occasions

4. When recognizing compensation under a share option plan, unanticipated forfeitures are treated as

a. A change in accounting policy

b. A loss
c. An income item
d. A change in accounting estimate

5. Which statement is true about share options?

a. IFRS requires using the intrinsic value method.

b. If previous experience indicates that share options shall be forfeited before vesting, the fair value
estimate on grant date should be adjusted.
C. Compensation expense must be adjusted during the service period to reflect changes in the
market price of underlying shares.
d. All of these statements are true about share options.

problem 24-34 Multiple choice (IFRS)

1.An entity shall recognize the goods or services received in a share-based payment transaction
a. Only when the share-based payment is cash-settled.
b. When the entity receives the goods or services.

C 、 Only when the vesting period ends.

d.Only on the date that the equity instruments are granted.
2.If share options granted to employees under a share-based payment transaction vest immediately
a. The entity should defer recognition of the services rendered by the employees.
b. The entity should record a liability.
c. The employees are unconditionally entitled to the share-based payments.
d. The entity should account for the services when these are rendered by the employees during the
vesting period.

3. For equity-settled share-based payment transactions, an entity shall measure the goods or services
received

a. Always at the fair value of goods and services received.

b. Always at the fair value of the equity instruments issued.
c. At the cost of goods and services provided by employees.
 d. At the fair value of the goods or services received unless that fair value cannot be estimated
reliably.

4. For transactions for employee services as in share options, the fair value of the equity instruments
is measured

á. On the grant date.

b. On the exercise date.
c. At the end of the vesting period or exercise period, whichever is later.
d. At the date when the entity knows how many instruments will vest.

5. For transactions with parties other than employees, the measurement date is

a. The grant date.

b. The exercise date.
c. When the entity obtains the goods or the counterparty renders service.
d. When the warranty period for the goods or services expires.
6. On vesting date, the entity should
a. Never adjust the number of equity instruments that ultimately vest.
b. Revise the estimate to equal the number of equity instruments that ultimately vest for vesting
conditions based on employee service and based on nonmarket performance..
c. Revise the estimate to equal the number of equity instruments that ultimately vest for vesting
conditions based on employee service and based on market performance.
d. Revise the estimate to equal the number of equity instruments that ultimately vest for all vesting
conditions.

7. For share-based payment transaction offering a choice of settling the transaction in cash or by
transfer of equity instrument, the entity should account for the transaction as

a. Cash-settled share-based payment.

b. Cash-settled share-based payment unless the entity has a past practice of settling by issuing
equity instrument.
C. Cash-settled share-based payment transaction unless the option to settle in cash has no
commercial substance.
d. Cash-settled share-based payment transaction unless the entity has a past practice of settling by
issuing equity instrument or the option to settle in cash has no commercial substance.

8. In measuring the fair value of shares and the related goods or services received, an entity

a. Must always use observable market price of the entity's own shares.
b. Uses observable market price but only for nonemployee share-based transaction.
c. Uses price established by the board of directors for that type of share-based transaction.
d. Uses observable market price and other measures according to a measurement hierarchy.

9. For modification of vesting condition in an equity-settled share-based payment transaction for

employee services, the entity should
 a. Recognize the increase in fair value over the remaining vesting period from the date of the
modification.
b. Take the modified vesting condition into account only if it is beneficial to employees and
recognize the increase in fair value over the original vesting period.
C. Take the modified vesting condition into account only if it is beneficial to employees and
recognize the increase in fair value over the remaining vesting period from date of the modification.
d. Make no adjustment for compensation expense.

10. For a cash-settled share-based payment tansaction for employee services, the entity should
a. Recognize in profit or loss the cash paid out to the employees in the final year.
b. Recognize in profit or loss the cash paid out to the employees over the vesting period.
C. Recognize in profit or loss the estimate of the cash to be paid out to the employees over
the vesting period.
d. Recognize in profit or loss the grant date fair value of the liability over the vesting period.
 Problem 25-12(ACP)
On January 1,2020, Excelsior Company offered the chief executive officer share appreciation rights with
the following terms:

Predetermined price on January 1,2020 P100 per share

Number of shares 10,000 shares

Service period 3 years

Exercise date December 31,2022

The share appreciation rights are exercised on december 31, 2022

Quoted price

January 1,2020 100

December 31,2020 118

December 31,2021 112
December 31,2022 124

What amount of compensation expense should be recognized for 2021?

a.160,000
b. 60,000
C. 80,000
d. 20,000
Problem 25-13(IFRS)

Melissa Company granted 100 share appreciation rights to each of the 1,000 employees on January
1,2020.

The management estimated that 90% of the awards will vest on December 31,2022. The fair value of
each share appreciation right on December 31, 2020 is P10.

What is the fair value of the liability for the share appreciation rights on December 31, 2020?

a. 100,000
b. 900,000
C. 300,000
d.450,000

Problem 25-15 (AICPA Adapted)

On January 1, 2020, Cascade Company granted the president 80,000 share appreciation rights for past
services. The rights are exercisable immediately and expirè on December 31, 2021.

On exercise, the president is entitled to receive cash for the éxcess of the share market price on exercise
date over the market price on grant date.
The president did not exercise any of the rights in 2020. The president exercised the rights on December
31,2021 when the market price was P115.

The market price of the share was P100 on January 1,2020 and P120 on December 31,2020.

What amount should be recognized as gain on reversal of share appreciation rights in 2021?
a. 1,600,000
b.1,200,000
C. 400,000
d. 0
 Problem 25-16(IFRS)
On January 1, 2020, Svetlana Company granted to employees a share-based payment with cash and
share alternative.
The provisions include the right to a cash payment equal to the value of 10,000 phantom shares or
15,000 ordinary shares with a par, value of P40.
The grant is conditional upon the completion of three years'service. If the employees choose the share
alternative,the shares must be held for three years after the vesting date.
At grant date, the share price is P60. At the end of 2020, 2021 and 2022 the share prices are P63, P66
and P72, respectively.
After taking into account the effect of vesting restrictions, the entity estimated that the fair value of the
share alternative on grant date is P45.
On January 1, 2023, the employees selected the share alternative.

1. What is the equity component on January 1, 2020 arising from the share-based payment with cash and
share alternative?

a. 675,000
b. 600,000
C. 225,000
d. 75,000
2. What is the compensation expense for 2022?

a. 720,000
b. 355,000
C. 280,000
d. 305,000
3. What amount of share premium should be recorded from the issuance of shares on January 1,2023?

a.195,000
b. 120,000
c.480,000
d. 375,000
 Problem 25-17(IFRS)
On January 1, 2020, Planet Company purchased an equipment with a cash price of P2,000,000. The
supplier can choose how the purchase is to be settled.
The choices are 20,000 shares with par value of P50 in one year's time, or a cash payment equal to the
market value of 15,000 phantom shares on December 31,2020.

At grant date on January 1, 2020,the market price of each share is P80 and on the date of settlement on
December 31, 2020, the market price of each share is P100.

1. What is the equity component arising from the purchase of equipment with share and cash
alternative?

a. 500,000
b. 400,000
C. 800,000
d. 0

2. What amount of interest expense should be recognized on December 31, 2020 if the supplier has
chosen the cash alternative?

a. 600,000
b. 400,000
C. 300,000
d. 0

3. What amount should be recógnized as share premium on December 31, 2020 if the supplier has
chosen the share alternative?

a. 2,000,000
b. 1,000,000
C. 200,000
d. 800,000
 Problem 25-20 Multiple choice (IFRS)
1. The payment for services in cash and based on the price of the entity's ordinary shares is what type
of share-baned payment transaction?
a. Asset-settled share-based payment transaction
b.Liability-settled share-based payment transaction
c.Cash-settled share-based payment transaction
d. Equity-settled share-based payment transaction
2. A cash-settled share-based payment transaction increases
a.A current asset
b. A noncurrent asset
c. Equity
d. A liability

3. Compensation cost for a share-based payment to employees that is classified as liability is measured
at

a. The change in fair value for each reporting period

b. The total fair value at grant date
c. The present value of cash payment
d. The total cash outlay for the period

4. What is the measurement date for share-based payment to employees that is classified as liability?

a. The service inception date

b. The grant date
c. The settlement date
d. The end of reporting period

5. For share appreciation rights, the measurement date for computing compensation is the

a. Date the rights mature

b. Date the share reaches a predetermined amount
Date of grant
d.Date of exercise

6.In accounting for share appreciation right, compensation expense is generally

a. Not recognized
b. Recognized on the date of grant
C.Allocated over the service period of employees
d. Recognized on the date of exercise
7.Which statement is true regarding share appreciation right?
a. Any change in estimated total compensation is recorded as a prior period error.
 b. The total amount of compensation is not known until the date the share appreciation right is
exercised.
C. The liability is adjusted only to reflect each additional year of service.
d. The share appreciation right is not recognized.
8.For cash settled share-based payment transaction, any change in fair value of liability is
a. Included in profit or loss
b. Included in retained earnings:
c. Treated as component of other comprehensive income
d. Not recognized

9.If share-based payment transaction provides that the employees have the right to choose the
settlement whether in cash or shares, the entity is deemed to have issued
a. A compound financial instrument
b. An equity instrument
c. A liability instrument
d. Either an equity instrument or a liability instrument but not both

10. If the entity has the choice of settlement in a cash and share alternative, the entity shall account for
the instrument initially as
a. Equity only
b. Liability only
C. Partly equity and partly liability
d. Either equity or liability but not both