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Practical caseIFRS 2L2 · Intermediate

Options with service, performance and market conditions: cumulative expense, revision of the expected number, no remeasurement and exercise

6 documents14 tasks≈ 75 min
0 / 17 items completed
Standards
IFRS 2 — Share-based Payment
Assistance levelHelp on demand · assistance on request
  • Method: on request
  • Checklist: on request
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Cadrane SA (fictitious entity) closes its accounts on 31 December. On 1 January 20X6, it granted an option plan to its managers (plan Q) and an option plan to its chief executive (plan R). You prepare the schedule of the expense from 20X6 to 20X8 and the entries.

Your assignment

Classify the two plans and say how their cost is measured; classify their conditions and say whether the number or the fair value reflects them; compute the cumulative expense of plan Q at 31 December 20X6 and then the expense of 20X6; compute the cumulative expense of plan Q at 31 December 20X7 and then the expense or reversal of 20X7; compute the expense of plan R; compute the reserve of plan Q at the end of 20X7 and of 20X8; record the four entries; present the cumulative effect on the financial statements and conclude. One document is not useful.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Intermediate level: help remains available, on demand.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 6 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 17) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

6 documents: open each one to read it.

Document 1Memo

Company profile and case conventions

Cadrane SA (fictitious entity) closes its accounts on 31 December; its functional currency is the euro. Case conventions: amounts in EUR; the fair values per option are those of an expert at the grant date, case data; case convention (pedagogical assumption, not attributed to IFRS 2): the expected total cost is the product of the fair value and the number of options expected, the elapsed share of the vesting period is expressed as a percentage, and the share-based payment reserve of plan Q is tracked separately; the entries are illustrative.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Managers entitled under plan Q100 units
Options per manager200 units
Fair value of a plan Q option€6.00
Exercise price of plan Q€10.00
Plan R options10,000 units
Fair value of a plan R option€4.00
Target price of plan R€40.00
Managers expected to stay at 31/12/20X690 units
Expected total cost of plan Q at 31/12/20X6€108,000.00
Elapsed share of the vesting period at 31/12/20X650%
Total cost of plan R€40,000.00
Elapsed share of the vesting period of plan R100%
Previous cumulative expense and opening reserve: nil€0.00
Managers meeting the service condition at 31/12/20X740 units
Actual total cost of plan Q at 31/12/20X7€48,000.00
Elapsed share of the vesting period at 31/12/20X7100%
Options exercised in 20X85,000 units
Recruitment invoice€14,500.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort6

  • Company profile and case conventions

  • Rules of plan Q (managers)

  • Rules of plan R (chief executive)

  • Management estimates and actual results

  • Exercise notice of 20X8

  • Recruitment invoice

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      14 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Professional judgement

        Classify plans Q and R and say how their cost is measured and whether the share price changes it.

      2. Task 2Analysis

        Classify the conditions of plans Q and R and say whether the number or the fair value reflects them.

      3. Task 3Calculation

        Plan Q: compute the cumulative expense at 31 December 20X6.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Plan Q: compute the cumulative expense at 31 December 20X6.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        Plan Q: compute the expense of 20X6.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Plan Q: compute the expense of 20X6.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Calculation

        Plan Q: compute the cumulative expense at 31 December 20X7.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Plan Q: compute the cumulative expense at 31 December 20X7.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Calculation

        Plan Q: compute the expense or reversal of 20X7.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Plan Q: compute the expense or reversal of 20X7.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: 20X7 reversal of plan Q (negative part)

      7. Task 7Calculation

        Plan R: compute the cumulative expense at 31 December 20X6.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Plan R: compute the cumulative expense at 31 December 20X6.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Calculation

        Plan Q: compute the reserve at the end of 20X7 and then at the end of 20X8.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Plan Q: compute the reserve at the end of 20X7 and then at the end of 20X8.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Reserve transferred on exercise

      9. Task 9Journal entries

        Record the 20X6 expense of plan Q.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      10. Task 10Journal entries

        Record the 20X6 expense of plan R.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      11. Task 11Journal entries

        Record the 20X7 reversal of plan Q.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      12. Task 12Journal entries

        Record the exercise of 20X8.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Record the exercise of 20X8.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Share capital and premium recognised

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        3. Line 3

        TotalsDebit0Credit0

      13. Task 13Effects on the financial statements

        What is the cumulative effect of the four entries on the financial statements?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      14. Task 14Conclusion

        Write the conclusion.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 17).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IFRS 2 §15
      • IFRS 2 §19
      • IFRS 2
      • IFRS 2
      • IFRS 2 §11
      • IFRS 2 §21
      • IFRS 2 §21A
      • IFRS 2 §30