Cash-settled award: liability remeasured at each closing date, change in profit or loss, settlement 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

Liability of plan 2

Purpose of the workpaper

Record the fair value of the right at the closing date (which reflects the market conditions and the non-vesting conditions), the number of rights expected to vest (which reflects the service and non-market performance conditions) and the elapsed share of the vesting period. Compute the liability at the closing date, reconcile it with the opening liability, the expense of the period, the decrease in fair value and the cash paid, then prepare the entries. The fair values, the numbers and the elapsed share are case data; the liability is remeasured until settlement.

Questions of the file covered by this workpaper

• Plan 2: compute the liability at 31 December 20X7.
• Plan 2: reconcile the closing liability with the opening liability and the expense.

• 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