Equity-settled award: cumulative expense, expense of the period, reserve and entries

Context

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.

Assignment

Expense and reserve of plan 1

Purpose of the workpaper

Record the grant-date fair value, the expected total cost at the closing date (fair value × number of instruments expected to vest), the elapsed share of the vesting period and the cumulative expense already recognised. Compute the cumulative expense at the closing date, then the expense of the period as the difference from the cumulative expense already recognised: it is negative when the revision of the expected number calls for a reversal. Reconcile the closing reserve with the ledger reserve. The total cost, the elapsed share and the numbers are case data; the grant-date fair value is never revised.

Questions of the file covered by this workpaper

• Plan 1: compute the cumulative expense at 31 December 20X7.
• Plan 1: compute the expense of 20X7.
• Plan 1: compute the reserve at 31 December 20X7, excluding the modification.

• MemoCompany profile and file conventionsOpen
• ContractRules of plan 1 (options)Open
• ScheduleManagement estimates and ledger of plan 1Open
• MinutesMinutes of the modification of plan 1Open
• ContractRules of plan 2 (share appreciation rights)Open
• ScheduleValuation of the rights at 31 December 20X7Open
• MemoManagement note on the expected numbersOpen
• MemoInputs of the valuation of the plansOpen
• MemoAcceptance letters of the executivesOpen
• InvoiceLegal fees invoiceOpen