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Professional fileIFRS 2L4 · Expert

File on a share-based payment plan: classification, measurement, expense of the period, modifications and disclosures (IFRS 2)

10 documents18 tasks≈ 300 min
0 / 22 items completed
Standards
IFRS 2 — Share-based Payment
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

Belmora SA (fictitious entity) closes its accounts on 31 December 20X7. The preparer builds the file of its two share-based plans, submitted to a review check: an option plan for managers, settled in shares and modified during the year, and a plan of share appreciation rights for executives, settled in cash. Teaching simulation: the review trail of the file (preparation, reviewer notes and final sign-off) is simulated for demonstration purposes; it is neither a real review nor a validation of the content.

Your assignment

Draw up the plan of the file; classify the settlement method of each plan, fix the grant date of the cash-settled plan and classify the conditions; compute the cumulative expense, the 20X7 expense and the reserve of the option plan; quantify the modification of July 20X7; compute the liability and the expense of the cash-settled plan; record the three entries and present their effect; prepare the information to disclose, judge the valuation inputs and deal with the review points; conclude.

You prepare a complete file: documents, work, entries and conclusion, then compare your work with the solution and the review points of the file.

Autonomous professional situation

As on a real engagement: no method, no checklist and no hints. You identify the issues yourself, organise the work and defend your conclusion.

  • Organise the work
  • Document each point
  • Argue the conclusion

Documents

File documents

10 documents: open each one to read it.

Document 1Memo

Company profile and file conventions

Belmora SA (fictitious entity) closes its accounts on 31 December 20X7; its functional currency is the euro. File conventions: amounts in EUR; the fair values are those of experts, file data; file convention (pedagogical assumption, not attributed to IFRS 2): the expected total cost is the product of the fair value and the expected number, the elapsed share is given as a percentage, the cash-settled liability builds up in proportion to the elapsed share, the incremental fair value of a modification is recognised over the period remaining since the modification and the amendment of June 2016 is assumed to apply; 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 160 units
Options per manager500 units
Fair value of an option at the grant€8.00
Elapsed share of the vesting period at 31/12/20X750%
Cumulative expense of plan 1 at 31/12/20X6€52,000.00
Reserve of plan 1 per the ledger, 31/12/20X6€52,000.00
Total fair value before the modification€96,000.00
Total fair value after the modification€144,000.00
Elapsed share of the period remaining since the modification20%
Executives entitled under plan 240 units
Rights per executive100 units
Total expected fair value of the rights at 31/12/20X7€28,800.00
Elapsed share of the vesting period of plan 250%
Opening liability of plan 2 and amounts not applicable: nil€0.00
Rights expected to vest3,600 units
Fair value of a right at 31/12/20X7€8.00
Liability of plan 2 per the ledger, 31/12/20X7€14,400.00
Legal fees€11,800.00

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 sort10

  • Company profile and file conventions

  • Rules of plan 1 (options)

  • Management estimates and ledger of plan 1

  • Minutes of the modification of plan 1

  • Rules of plan 2 (share appreciation rights)

  • Valuation of the rights at 31 December 20X7

  • Management note on the expected numbers

  • Inputs of the valuation of the plans

  • Acceptance letters of the executives

  • Legal fees invoice

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

      Organise your work freely: deal with each point, then argue your conclusion.

      1. Task 1Analysis

        Draw up the plan of the file: which plans fall within IFRS 2, how many instruments are granted and which documents are useful?

        Calculator

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

        Part 1 · Calculation

        Draw up the plan of the file: which plans fall within IFRS 2, how many instruments are granted and which documents are useful?

        1. units
        2. units

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Rights granted under plan 2 (40 × 100)

      2. Task 2Professional judgement

        Classify the settlement method of each plan.

      3. Task 3Professional judgement

        Fix the grant date of plan 2.

      4. Task 4Professional judgement

        Classify the conditions of plans 1 and 2.

      5. Task 5Calculation

        Plan 1: 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 1: compute the cumulative expense at 31 December 20X7.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Expected total cost of plan 1 at 31/12/20X7

      6. Task 6Calculation

        Plan 1: compute the expense of 20X7.

        Calculator

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

        Part 1 · Calculation

        Plan 1: compute the expense of 20X7.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      7. Task 7Calculation

        Plan 1: compute the reserve at 31 December 20X7, excluding the modification.

        Calculator

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

        Part 1 · Calculation

        Plan 1: compute the reserve at 31 December 20X7, excluding the modification.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Calculation

        Modification: compute the incremental fair value.

        Calculator

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

        Part 1 · Calculation

        Modification: compute the incremental fair value.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Calculation

        Modification: compute the additional expense of 20X7.

        Calculator

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

        Part 1 · Calculation

        Modification: compute the additional expense of 20X7.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      10. Task 10Calculation

        Plan 2: compute the liability at 31 December 20X7.

        Calculator

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

        Part 1 · Calculation

        Plan 2: compute the liability at 31 December 20X7.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      11. Task 11Calculation

        Plan 2: reconcile the closing liability with the opening liability and the expense.

        Calculator

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

        Part 1 · Calculation

        Plan 2: reconcile the closing liability with the opening liability and the expense.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      12. Task 12Journal entries

        Plan 1: record the expense of 20X7.

        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

      13. Task 13Journal entries

        Plan 1: record the additional expense of the modification.

        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

      14. Task 14Journal entries

        Plan 2: record the expense of 20X7.

        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

      15. Task 15Effects on the financial statements

        What is the cumulative effect of the three 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. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      16. Task 16Analysis

        Which information is to be prepared for the notes, and what is the total expense of 20X7?

        Calculator

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

        Part 1 · Calculation

        Which information is to be prepared for the notes, and what is the total expense of 20X7?

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      17. Task 17Professional judgement

        Are the inputs of the valuation of the rights of plan 2 sufficiently supported?

      18. Task 18Conclusion

        Write the conclusion of the file and deal with the review points.

      File review

      Points raised during the review of this file: read them as the preparer would.

      Review notes

      • BlockingResolvedReview point (blocking): support the grant date of plan 2 (start of the service, hence elapsed share) with evidence of the acceptance by the executives
      • Non-blockingOpenReview point: attach the source of the volatility used for the valuation of the rights

      Information requests

      • ObtainedRequest to the executives: evidence of the acceptance of the terms of plan 2
      • Assumption documentedDocumented assumption: volatility of 30 % equal to that of the market

      Completion checklist

      • Settlement method classified on the terms of each planDone
      • Grant date of plan 2 supported by the acceptance of the executivesDone
      • Cumulative expense, expense of the period and reserve of plan 1 computedDone
      • Modification quantified on the fair values at the modification dateDone
      • Entries balanced and effect on the financial statements establishedDone
      • Source of the volatility to be attached to the fileTo review

      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 / 22).

      Document this file

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

      Normative references

      • IFRS 2 §30
      • IFRS 2 §15
      • IFRS 2 §19
      • IFRS 2 §27
      • IFRS 2
      • IFRS 2
      • IFRS 2 §26
      • IFRS 2 §47
      • IFRS 2 §50
      • IFRS 2 §51