SHARE COMPENSATION

ASSIGNMENT

Share Options

A. On January 2, 2018, the shareholders of Mari Company approved a plan that grants
the company’s four executives options to purchase 2,000 shares each of the
company’s P50 par value ordinary share. The options are granted on January 2, 2018
and may be exercised anytime from January 1, 2020 to December 31, 2021. Based on
an option-pricing model used by the enterprise, the fair value of the option on January 2,
2018 is P35. The option price per share is P60 and the market price of the ordinary
shares on January 2, 2018 is P90 per share. At the end of 2018, it was expected that
all four executives would stay until the end of 2019, thus, all options were expected to
vest. All options vested and were exercised on December 31, 2020.

Required: Entries to record the above transactions.

If during the vesting period, some options are cancelled due to non-completion of
the minimum required service period, as in this example, the total value of the
remaining options that has not been charged to expense shall be recognized as
expense over the remaining number of years in the vesting period.

B. On January 2, 2018, the shareholders of Mari Company approved a plan that grants
the company’s four executives options to purchase 2,000 shares each of the
company’s P50 par value ordinary share. The options are granted on January 2, 2018
and may be exercised anytime from January 1, 2020 to December 31, 2020. Based on
an option-pricing model used by the enterprise, the fair value of the option on January 2,
2018 is P35. The option price per share is P60 and the market price of the ordinary
shares on January 2, 2018 is P90 per share.

On June 30, 2019, an executive with option to purchase 2,000 shares decided to
migrate to Canada and resigned from Mari Company. On March 31, 2020, all of the
three remaining executives exercised their options.

If during the vesting period, some options are cancelled due to non-completion of the
minimum required service period, as in this example, the total value of the remaining
options that has not been charged to expense shall be recognized as expense over the
remaining number of years in the vesting period.

Required: Entries to record the above transactions.

The entity shall make no subsequent adjustment to total equity after the vesting
date, even if some of the options that already vest are cancelled before their
expiration date. However, the requirement of PFRS /IFRS 2 does not preclude the
entity from recognizing a transfer within equity.

C. On January 2, 2018, the shareholders of Mari Company approved a plan that grants
the company’s four executives options to purchase 2,000 shares each of the
company’s P50 par value ordinary share. The options are granted on January 2, 2018
and may be exercised anytime from January 1, 2020 to December 31, 2020. Based on
an option-pricing model used by the enterprise, the fair value of the option on January 2,
2018 is P35. The option price per share is P60 and the market price of the ordinary
shares on January 2, 2018 is P90 per share

Assume that all four executives who have been granted the share options stayed with
the company until the end of 2019. Hence, all the options vested. On June 30, 2020,
one of the executives resigned from the company without exercising the options. Thus,
2,000 options were cancelled. All the remaining options were exercised on December
31, 2020
Required: Entries to record the above transactions.
D. Camil Company granted 100 shares option to each of its 500 employees on January
1, 2018. The option plan allows the employees to purchase a share of the entity’s P100
par value ordinary share capital at P120. On January 1, 2018, the fair value of each
option was determined to be P24 based on option pricing model used by the
company. The option plan requires the employees receiving the options to be in the
employ of the company at least until December 31, 2020. Options are exercisable
starting January 1, 2021 and expire on December 31, 2022.

Actual and revised estimates of employees leaving the company during 2018, 2019 and
2020 are as follows:

2018: 25 employees left; 30 more employees are expected to leave before

December 31, 2020
2019: 20 employees left; 15 more employees are expected to leave before
December 31, 2020.
2020: 10 employees left.

Of the 44,500 options vested, 44,000 were exercised on December 31, 2021 and the
remainder lapsed.

Required:
a. Compute the amount of compensation expense to be recognized, as a result of the
share option plan during 2018, 2019, and 2020.
b. Journal entries to the above transactions from 2018 to 2022.

E. On January 2, 2018, the shareholders of Pau Company approved a plan that grants
the company’s four executives options to purchase 2,000 shares each of the company’s
P50 par value ordinary shares. The options are granted on January 2, 2018 and may
be exercised any time from January 1, 2020 to December 31, 2022.

The options price per share is P60 and the market price of each ordinary share was P90
on January 2, 2018; P96 on December 31, 2018 and P100 on December 31, 2019.

Required:
a. Entries during 2018 and 2019 assuming no executive left the company during the
vesting period.
b. Assuming that the options were exercised on June 30 2020 when the market price of
an ordinary share is P105, entries to record the said transaction.

F. On December 31, 2018, Pau Company issued 2,000 share options to each of the five
key executives that will vest once revenues reach P100 million a year until December
31, 2021. The option expire on January 1, 2022. The employee must still be in the
employ of the company at the time the share options vest. Based on the pricing model
used by Pau Company, the market value of the option on the date of grant is P30.

At the end of 2019, it is expected that none of the executives who have been granted
the share options will leave the company until 2022. It is also estimated that revenue of
P100 million will be reached by the year 2021.

Required:
a. Entry to record transaction at the end of 2021.

G. On January 1, 2018, Mari Company granted 100 share options to each of its 500
employees for the purchase of the company’s ordinary share capital at P120 per share.
The options are exercisable by employees who are in the employ of the company until
the exercise of the options. The share options will vest as follows:
At the end of 2018, if earnings increase by 15%
At the end of 2019, if earnings over two years (2018 and 2019) increase by
an average of 12%
At the end of 2020, if earnings over three years (2018, 2019, and 2020) increase
by an average of 10%.
On January 1, 2018, the fair value of each option is P24.

Actual and estimate of the entity’s earnings are as follows:

End of 2018: actual, 12%; estimated earnings in 2019, 12%.
End of 2019: actual, 10%; estimated earnings in 2020, 8%
End of 2020: actual, 11%.

Actual and estimate of the employees who leave the company are as follows:
2018: 20 employees left, additional employees expected to leave, 40
2019: 15 employees left, additional employees expected to leave, 20
2020: 16 employees left.
‘
Required:
Entries to record transactions, year 2018, 2019 and 2020.

Share Appreciation Rights

A. On January 1, 2018, Camil Company grants 100 cash share appreciation rights to
each of its 400 employees, on the condition that the employees remain in its employ at
least until December 31, 2020.

The number of employees who left during 2018 and the estimated number of
employees still expected to leave until December 31, 2020 as estimated at the end of
2018 and 2019 are as follows:
2018: 20 employees left, 35 employees expected to leave until December 31,
2020.
2019: 15 employees left, revised estimate, 15 employees expected to leave until
December 31, 2020.
2020: 10 employees left.
The entity estimates the fair values of the SAR’s at the end of each year as follows:
2018 - P12.40 2021 - P18.00
2019 - P15.20 2022 - P21.00
2020 - P16.40

The market values of the ordinary share are available on the following dates:
January 1, 2018 - P60.00 December 31, 2020 - P76.40
December 31, 2018 - P71.00 December 31, 2021 - P78.00
December 31, 2019 - P74.00 December 31, 2022 - P81.00

All share appreciation rights were exercised on December 31, 2022.

Required:
Entries to record transactions from 2018 to 2022

B. Pau Company issued share appreciation rights to its Chief executive Officer on
January 1, 2018. The share appreciation rights may be exercised beginning January 1,
2021 provided that the officer is still in the employ of the company at the date of
exercise. Each right provides for a cash payment equal to the amount the share price of
Pau Company exceeds P50. The equivalent number of shares for share appreciation
rights will be based on the level of sales of the company during the year 2020, as
follows:

Level of Sales Equivalent Shares Granted

P250 million – P400 million 10,000
Above P400 million – P750 million 15,000
Above P750 million 20,000
The level of sales actually achieved by the enterprise and the share price at the end of
each year are:

Year Level of Sales Share price, end of year

2018 P350 million P74
2019 P410 million P85
2020 P760 million P95

Required:
Entries to record transactions at the end of each year (2018, 2019, 2020 and 2021).

C. On January 1, 2018, an entity granted to its chief operations officers the right to
choose either 5,000 ordinary shares or to receive cash payment equal to 4,000 shares.
The grant is conditional upon completion of two years of service. The entity estimates
that the value of the share alternative at the date of grant is P60 per share. Par value
per share is P40.

The fair values per share at January 1, 2018 December 31, 2018 and December 31,
2019 are P65, P68 and P72, respectively.

The officer exercised his rights on June 30, 2020 when the market price of each share
is P75.

Required:

Entries to record the above transactions.