Question bank — IFRS 2 — Share-based Payment
71 questions in FR/EN/ES, scored by the real scoring engine.
The share-based payment transaction: goods or services for shares or a liability linked to the share3 questions
- Vektra SA pays its sales staff each year a cash bonus equal to 3% of revenue, with no link to the price of its shares; this bonus is a share-based payment transaction.True / falseL1
- Which of these situations is a share-based payment transaction?Single choiceL1
- A colleague writes: "IFRS 2 covers option plans reserved for executives; shares given to a supplier in return for its services are not covered." What is the error in this reasoning?Single choiceL1
Equity-settled, cash-settled or with a choice of settlement3 questions
- Which statements about the settlement method of an award are correct? More than one answer is possible.Multiple choiceL1
- After three years of service, Lumen SA promises its executives 100 shares of Lumen issued by the company; the value of these shares moves with the share price. How is the award classified?Single choiceL2
- Verano SA has two plans. Plan A: after three years of service, each executive receives 200 shares of Verano. Plan B: after three years of service, each executive receives in cash an amount equal to the rise in Verano's share price over the period, multiplied by 200. Write a short note classifying each plan by settlement method and justifying the classification.JudgmentL2
The grant date: agreement on the terms and approvals obtained3 questions
- A share-based payment arrangement is granted as soon as the plan is communicated to the counterparty, even if a required approval, for example that of the shareholders, has not yet been obtained.True / falseL1
- On 1 December, Alba SA communicates an option plan to its executives. The services concerned start on the following 1 January. The plan is subject to approval by the general meeting, obtained on 15 February; the terms do not change on that occasion. What is the grant date?Single choiceL2
- An analyst writes: "The employees' services started on 1 January, but the plan was only approved on 15 February; there is therefore nothing to recognise for January and February, because fair value is only defined at the grant date." What is the error in this reasoning?Single choiceL2
The boundaries of the scope: IAS 19, IAS 32, IFRS 9 and business combinations2 questions
- Cobalt SA pays its employees two cash bonuses: bonus X, equal to 4% of the profit for the year, and bonus Y, equal to the rise in Cobalt's share price multiplied by 500. Which treatment is correct?Single choiceL2
- Which statements about transactions outside the scope of IFRS 2 are correct? More than one answer is possible.Multiple choiceL2
Recognise when received: as an expense or an asset3 questions
- For an employee option plan settled in shares, the entity waits for the exercise date of the options to recognise the services received.True / falseL1
- Nordis SA receives consulting services, paid for in options, that do not meet the recognition criteria for an asset. How does it account for them as they are received?Single choiceL1
- On 31 December, Nordis SA grants a consultant 5,000 options that vest immediately, with no condition at all, in return for services already rendered; the total fair value of the options at the grant date is …. Case convention: the services do not meet the criteria for recognition as an asset. Record the entry at the grant date.Journal entryL2
The credit side: equity or liability3 questions
- What is the counterpart of the expense, on the one hand for an equity-settled option plan and on the other for a cash-settled share appreciation rights plan?Single choiceL1
- A trainee records the annual expense of an executive option plan, settled in shares, by crediting a liability account "amounts owed to executives". What is the error?Single choiceL2
- Helia SA has granted its executives share appreciation rights settled in cash. At the closing date, the expense for the period, computed from the fair value of the liability, is …. Record the entry for the expense of the period.Journal entryL2
Employees: the fair value of the instruments at grant date3 questions
- Services received from employees in exchange for equity instruments are measured by reference to the fair value of the instruments granted, because the fair value of those services generally cannot be estimated reliably.True / falseL1
- A management controller writes: "For our employee option plan, settled in shares, we measure the fair value of the options at each closing date and adjust the cumulative expense accordingly." What is the error?Single choiceL2
- Orsay SA grants its employees options on top of their salary. A director proposes measuring the services received from an estimate of the market pay for those roles. Write a short note stating the measurement basis used for employees, justifying that choice and specifying the measurement date.JudgmentL2
Other parties: the rebuttable presumption2 questions
- Brisa SA settles in shares a firm of architects for plans delivered on dates spread over the year; the fair value of the plans delivered can be estimated reliably (case assumption). How does Brisa measure these services?Single choiceL2
- Two situations of Delta SA, which settles in shares with parties other than its employees. Situation A: a training body gives sessions each quarter, and public rates exist for comparable sessions. Situation B: an expert receives shares for specific research work, delivered over the year, with no market equivalent or comparison price, so that its fair value cannot be estimated reliably (case facts). Write an assessment note: is the presumption of reliable estimation rebutted in each situation, and what measurement basis follows?JudgmentL3
No remeasurement after the grant date2 questions
- Lumen's share price has doubled since the grant of an equity-settled option plan; Lumen therefore remeasures the plan's reserve upwards at each closing, until exercise.True / falseL2
- Orsay SA issues 15,000 shares on exercise of options under an equity-settled plan; it receives … as the exercise price. The share-based payment reserve built up for these options, measured at the grant date, is …. Case convention: the reserve is cleared to share capital and premium on exercise. Record the exercise entry.Journal entryL2
Estimating fair value: market price or model and inputs1 question
The types of conditions: service, performance and non-vesting3 questions
- Which statements about the conditions of an option plan are correct? More than one answer is possible.Multiple choiceL1
- Verano SA grants options to its executives under three conditions: (a) remain with the company for three years; (b) reach cumulative operating profit of EUR 12 million; (c) a share price of EUR 30 at the end of the three years. Which classification is correct?Single choiceL2
- Orion SA grants options under three conditions: (a) remain in post for three years; (b) revenue growth of at least 8% a year; (c) a share price of at least EUR 25 at the end of the period. Write a note classifying each condition and stating how each is reflected in the measurement.JudgmentL2
Spreading the expense over the vesting period3 questions
- Options granted to employees vest only after three years of service. How does the entity account for the services received?Single choiceL1
- Lumen SA has granted options that vest after five years of service. The expected total cost of the plan, the grant-date fair value multiplied by the number of options expected to vest, is … (case data). Case convention: services are received evenly, and two years out of five have elapsed, i.e. … of the vesting period. Compute the cumulative expense at the closing date.CalculationL2
- For an equity-settled option plan vesting over five years, the cumulative expense at the end of year two is …; the expense recognised in year one is …. Record the entry for the year-two expense.Journal entryL2
Revising the number expected to vest: the cumulative catch-up3 questions
- An option plan has a three-year service condition. At the end of year two, the entity revises downwards, because of more departures than expected, the number of options it expects to vest. How does it treat this revision?Single choiceL2Variant
- Helia SA has granted options with a four-year service condition. At the end of year one, the cumulative expense recognised is …. At the end of year two, the entity revises the number of options it expects to vest: the expected total cost becomes … (case data; the grant-date fair value is unchanged). Case convention: the elapsed share of the vesting period is …. Compute the cumulative expense at the end of year two and the expense for that year.CalculationL3
- A colleague writes: "At the N2 closing we revised downwards the number of options expected. This revision applies to future periods only: the N1 expense already recognised stays unchanged." What is the error?Single choiceL2Variant
Market and non-vesting conditions: no true-up3 questions
- An option plan is subject to a target share price and to three years of service. The employees stay three years, but the target price is not reached; the entity then reverses the cumulative expense recognised.True / falseL2
- Which statements about market conditions and non-vesting conditions are correct? More than one answer is possible.Multiple choiceL2
- Alba SA granted an executive two tranches of options. Tranche 1: three years of service and a target cumulative operating profit. Tranche 2: three years of service and a target share price. The executive stays three years; at the end of the period, the target profit is not reached (tranche 1) and the target price is not reached (tranche 2). What is the effect on the cumulative expense of each tranche?Single choiceL3
Cumulative expense and period expense over several years3 questions
- Alba SA granted 100 employees 500 options each, with a four-year service condition; the fair value of one option at the grant date is EUR 8, i.e. … for all the options granted. At the end of year two, the entity expects … of the options to vest. Case convention: the elapsed share of the vesting period is …. Compute the expected total cost, then the cumulative expense at the closing date.CalculationL2
- An analyst computes the cumulative expense at the end of year three of a four-year plan using the fair value of all the options granted: 600,000 × 75% = 450,000. The entity nevertheless expects only 80% of the options to vest. What is the error?Single choiceL3
- For an equity-settled option plan, the cumulative expense recognised at the previous closing is …. At the year-end, the entity revises downwards the number of options expected because of more leavers, and the recomputed cumulative expense is …. Record the entry for the year.Journal entryL3
The beneficial modification: the original cost plus the incremental fair value2 questions
- Verano SA lowers the exercise price of its executives' options, which benefits them, two years before the end of the vesting period. At the modification date, the fair value of all the modified options is … and that of the original options is … (case data, measured at the same date). Case convention: the difference is recognised evenly over the remaining period, of which … has elapsed at the closing date. Compute the incremental fair value, then the cumulative additional expense at the closing date, on top of the original expense.CalculationL3
- A trainee writes: "After the cut in the exercise price, which benefits the executives, we keep recognising the expense computed at the grant date and add nothing: the modification has no effect on profit." What is the error?Single choiceL2
The non-beneficial modification: the original cost continues1 question
Cancellation and settlement: acceleration and repurchase2 questions
- Nordis SA cancels, during the vesting period, an equity-settled option plan, with no replacement instrument and no payment to the executives. The total cost of the plan at the grant date was … (case data) and the cumulative expense recognised up to the cancellation is …. Compute the expense to be recognised immediately at the cancellation date.CalculationL2
- Nordis SA cancels an equity-settled option plan and pays the executives … in cash at the cancellation date. The fair value of the cancelled options at that date is … (case data). Case convention: the remaining expense has already been accelerated. Record the entry for the payment.Journal entryL3
The cash-settled liability: remeasured at each reporting date3 questions
- For a cash-settled transaction, the fair value of the liability is remeasured at each closing date and at the settlement date, the changes being recognised in profit or loss for the period.True / falseL1Variant
- Brisa SA has granted its executives share appreciation rights settled in cash, with a four-year service condition. At the end of year two, the total fair value of the rights expected to vest, measured at that date, is … (case data). Case convention: the elapsed share of the vesting period is …. The liability recognised at the previous closing is … and no cash has yet been paid. Compute the liability at the closing date, then the expense for the year.CalculationL2
- A controller writes: "Our share appreciation rights are settled in cash; we measured the liability at the grant-date fair value and will not adjust it again." What is the error?Single choiceL2Variant
The present obligation test for cash settlement2 questions
- In a transaction with a settlement alternative, how does the entity account for it?Single choiceL2
- Zéphyr SA's plan provides that the company chooses, at vesting, to deliver shares or to pay an equivalent amount in cash, with no link to a target price. Over the last three years, Zéphyr has settled each plan in cash and has told its employees it will continue to do so (case facts). Write an assessment note on whether a present obligation to settle in cash exists and on the classification of the award.JudgmentL3
Counterparty choice: a compound instrument2 questions
- A plan gives each employee, at vesting, the choice between a sum in cash and a number of shares of the entity. How is the award classified?Single choiceL3
- An employee may choose between cash and shares when the award vests. Which statements are correct? More than one answer is possible.Multiple choiceL3
Entity choice: cash settlement is a repurchase2 questions
- Lumen SA has a plan settled, at vesting, either by delivering shares or by paying an equivalent amount in cash, at Lumen's choice. No commitment, practice or communication obliges Lumen to settle in cash (case facts). How does it classify the award?Single choiceL3
- Lumen SA has classified as equity-settled a plan whose settlement method it chooses. At vesting, it decides to settle in cash and pays …, an amount equal to the fair value of the instruments at the settlement date (case data). Record the settlement entry.Journal entryL3
Group transactions: the entity receiving the services1 question
The parent grants its own shares to a subsidiary's employees1 question
2016 amendment: conditions in cash-settled transactions2 questions
- For cash-settled share appreciation rights with a three-year service condition, a controller allows for the expected leavers by reducing the unit fair value of each right. What is the error?Single choiceL3
- Helia SA has granted cash-settled share appreciation rights, with a four-year service condition. At the end of year three, the fair value of all the rights granted, measured at that date and ignoring the service condition, is … (case data). The entity expects … of the rights to vest; case convention: the elapsed share of the vesting period is …. The 2016 amendment applies to annual periods beginning on or after 1 January 2018. Compute the fair value of the rights expected to vest, then the liability at the closing date.CalculationL3
2016 amendment: net settlement for withholding tax2 questions
- An equity-settled share plan includes a net settlement clause: the entity withholds part of the shares to be delivered in order to pay the employee's tax to the tax authority. A colleague classifies the whole plan as cash-settled because of this clause. What is the error?Single choiceL3
- An equity-settled plan of Brisa SA includes a net settlement clause: at vesting, the value of the shares due to an executive is … and Brisa withholds, to pay the executive's tax to the tax authority, shares representing … of that value (withholding rate set by tax law: case data). Compute the amount withheld and the value of the shares delivered to the executive. The 2016 amendment applies to annual periods beginning on or after 1 January 2018.CalculationL3
2016 amendment: from cash-settled to equity-settled1 question
Disclosures on the nature and extent of the arrangements2 questions
- Among the disclosures, the entity describes each type of share-based payment arrangement existing during the period, including its vesting conditions and the maximum term of the options.True / falseL2
- Which statements about the disclosure of the nature and extent of share-based payment arrangements are correct? More than one answer is possible.Multiple choiceL2
Disclosures on fair value, expense and liabilities2 questions
- For its cash-settled transactions, what information about the liabilities does the entity disclose?Single choiceL2
- An entity discloses the total expense for the period on its share-based payments without distinguishing the part relating to equity-settled transactions. What is the error?Single choiceL3
Link with IAS 32: two standards, two subjects1 question
Link with IAS 12: deferred tax on awards2 questions
- Nordis SA has granted employee options whose exercise will give rise to a future tax deduction. At the closing date, the intrinsic value of all the options is … and the vested share is …; the expected tax deduction is computed on the intrinsic value multiplied by the vested share (case convention). The cumulative expense recognised is … and the tax rate is … (case data). Compute the deferred tax asset and the part of the tax effect taken directly to equity.CalculationL4
- At the closing date, the expected future tax deduction on an option plan is 450,000, while the cumulative expense recognised is 360,000. A colleague takes the tax effect of the whole expected deduction to profit or loss. What is the error?Single choiceL3
Link with IAS 33: employee options in diluted earnings per share1 question
Link with IFRS 3: replacement awards2 questions
- In a business combination, Altaïr SA, the acquirer, replaces awards held by employees of the acquiree with replacement awards whose fair value is …. The share of pre-combination service, determined under IFRS 3, is … (case data); the market-based measure of the acquiree awards replaced equals that of the replacement awards (case data). Compute the part included in the consideration transferred and the part that will be a post-combination expense.CalculationL4
- In a business combination, a colleague takes the whole fair value of a replacement award, 500,000, to the consideration transferred, on the ground that it replaces an award held by employees of the acquiree. What is the error?Single choiceL4