Since 1977
THEORY OF ACCOUNTS
ToA.1823 Share-based Payments
REVIEW QUESTIONS
1. Which of the following is true regarding the
requirements of PFRS 2?
a. Private companies are exempt.
b. "Small" companies are exempt.
c. Subsidiaries using their parent entity's shares as
consideration for goods and services are exempt.
d. There are no exemptions from PFRS 2'
2. Share-based payment transaction is a transaction in
which the entity
a. Receives goods or services from the supplier of
those goods or services (including an employee) in
a share-based payment arrangement.
b. Incurs an obligation to settle the transaction with
the supplier in a share-based payment
arrangement when another group entity receives
those goods or services.
c. Either a or b.
d. Neither a nor b.
3. Cash-settled share- based payment transaction is a
share-based payment transaction in which the entity
a. Acquires goods or services by incurring a liability to
transfer cash or other assets to the supplier of
those goods or services for amounts that are based
on the price (or value) of equity instruments
(including shares or share options) of the entity or
another group entity.
b. Receives goods or services as consideration for its
own equity instruments (including shares or share
options),
c. Receives goods or services but has no obligation to
settle the transaction with the supplier.
d. All of the above.
4. Which of the following transactions involving the
issuance of shares does not come within the definition
of a "share-based" payment under PFRS 2?
a. Employee share purchase plans.
b. Employee share option plans.
c. Share-based payment relating to an acquisition of
a subsidiary.
d. Share appreciation rights.
5. Which statement is incorrect regarding recognition of
share-based payment transactions?
a. An entity shall recognize the goods acquired in a
share-based payment transaction when it obtains
the goods.
b. An entity shall recognize the services received in a
share-based payment transaction as the services
are received.
c. The entity shall recognize a corresponding increase
in equity regardless of the nature of the share-
based payment transaction.
d. When the goods or services received or acquired in
a share-based payment transaction do not qualify
for recognition as assets, they shall be recognized
as expenses.
Page 1 of 2 www.prtc.com.ph
PRTC CARES
MAY 2015
6. Which statement is incorrect regarding measurement
of equity-settled share-based payment transactions?
a. The entity shall measure the goods or services
received, and the corresponding increase in equity,
directly, at the fair value of the goods or services
received, unless that fair value cannot be
estimated reliably.
b. If the entity cannot estimate reliably the fair value
of the goods or services received, the entity shall
measure their value, and the corresponding
increase in equity, indirectly, by reference to the
fair value of the equity instruments granted.
c. For transactions with employees and others
providing similar services, the entity shall measure
the fair value of the services received by reference
to the fair value of the equity instruments granted,
because typically it is not possible to estimate
reliably the fair value of the services received.
d. The fair value of equity instruments shall be re-
measured every period end until settlement.
7. In relation to share-based payment transactions, grant
date is
a. The date at which the entity and another party
(including an employee) agree to a share-based
payment arrangement, being when the entity and
the counterparty have a shared understanding of
the terms and conditions of the arrangement.
b. The date when the entity confers on the
counterparty the right to cash, other assets, or
equity instruments of the entity, provided the
specified vesting conditions, if any, are met.
c. The date when approval is obtained if the
agreement is subject to an approval process (for
example, by shareholders).
d. All of the above.
8. On June 1, 20X4. an entity offered its employees share
options subject to the award being ratified in a general
meeting of the shareholders. The award was approved
by a meeting on September 5, 20X4. The entity's year-
end is June 30. The employees were to receive the
share options on June 30, 20X6. At which date should
the fair value of the share options be valued for the
purposes of PFRS 2?
a. June 1, 20X4. c. September 5, 20X4.
b. June 30,20X4. d. June 30, 20X6.
9. When applying PFRS 2 an entity measures fair value in
accordance with
a. PFRS 2 c. PAS 32
b. PFRS 13 d. PAS 2
10. Many shares and most share options are not traded in
an active market. Therefore, it is often difficult to
arrive at a fair value of the equity instruments being
issued. Which of the following option valuation
techniques should not be used as a measure of fair
value in the first instance?
a. Black-Scholes model.
b. Binomial model.
c. Monte Carlo model.
d. Intrinsic value.
ToA.1823
EXCEL PROFESSIONAL SERVICES, INC.
11. A condition upon which the exercise price, vesting or
exercisability of an equity instrument depends that is
related to the market price of the entitys equity
instruments, such as attaining a specified share price
or a specified amount of intrinsic value of a share
option, or achieving a specified target that is based on
the market price of the entitys equity instruments
relative to an index of market prices of equity
instruments of other entities.
a. Service c. Market
b. Performance d. Vesting
12. Which of the following conditions must be taken into
account when estimating fair value of equity
instruments at the measurement date?
a. Service c. Market
b. Performance d. None of these
13. An entity shall recognize the goods or services
received from a counterparty irrespective of whether
which condition is satisfied
a. Service c. Market
b. Performance d. None of these
14. Which statement is incorrect if a grant of equity
instruments is cancelled or settled during the vesting
period?
a. The entity shall account for the cancellation or
settlement as an acceleration of vesting, and shall
therefore recognize immediately the amount that
otherwise would have been recognized for services
received over the remainder of the vesting period.
DO-IT-YOURSELF (DIY) DRILL
1. Which statement is false share-based payment?
a. The services received should be measured at the fair
value of the employees' services.
b. Fair value should be measured at the date of grant.
c. The fair value of the liability should be remeasured
at the end of each reporting period.
d. The fair value of the liability should be remeasured
at the date of settlement.
2. The Taupo Company has entered into a contract with
The Galilee Company. Galilee will supply Taupo with a
range of services. The payment for those services will
be in cash and based upon the price of Taupo's ordinary
shares on completion of the contract. In accordance
with PFRS2 Share-based payment, what type of share-
based payment transaction does this represent?
a. Asset-settled share-based payment transaction
b. Liability-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Equity-settled share-based payment transaction
3. The Palu Company has issued a range of share options
to employees. In accordance with PFRS2 Share-based
payment, what type of share-based payment transaction
does this represent?
a. Asset-settled share-based payment transaction
b. Equity-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Liability-settled share-based payment transaction
z
Page 2 of 2 www.prtc.com.ph
b. Any payment made to the employee on the
cancellation or settlement of the grant shall be
accounted for as the repurchase of an equity
interest.
c. Any payment made to the employee on the
cancellation or settlement of the grant that
exceeds the fair value of the equity instruments
granted, measured at the repurchase date shall be
recognized as an expense.
d. If the share-based payment arrangement included
liability components, the entity shall remeasure the
fair value of the liability and equity components at
the date of cancellation or settlement.
15. Under PFRS2 Share-based payment, in which ONE of the
following will a cash-settled share-based payment give
rise to an increase?
a. A current asset c. Equity
b. A non-current asset d. A liability
16. In accordance with PFRS2 Share-based payment, how,
if at all, should an entity recognize the change in the fair
value of the liability in respect of a cash-settled share-
based payment transaction?
a. Should not recognize in the financial statements but
disclose in the notes thereto
b. Should recognize in the statement of changes in
equity
c. Should recognize in other comprehensive income
d. Should recognize in profit or loss
- now do the DIY drill -
4. The exercise price and market price of stock under a
fixed compensatory stock option plan are equal on the
grant date. The fair value of the options is greater than
the option price. In accordance with PFRS2,
a. Compensation expense will be recognized in
connection with the option plan.
b. No compensation expense will be recognized in
connection with the option plan.
c. Deferred compensation will be recognized.
d. No paid-in capital from stock options will be
recognized.
5. Joice, a public limited company, has granted share
options to its employees prior to the date from which
PFRS 2 became applicable. The company decided after
the issuance of PFRS 2 to reprice the options. The
original exercise price of P20 was repriced at P15 per
option. PFRS 2 would require the company to
a. Apply the Standard to the share options from the
original grant date and ignore the repricing.
b. Apply the Standard to the share options from the
original grant date, taking into account the
repriced award.
c. Apply the Standard to the repriced award only.
d. Ignore the Standard for the whole award of share
options.
6. Option pricing models take into account which of the
following factors
a. The current price of the underlying shares
b. The expected volatility of the share price
c. The risk-free interest rate for the life of the option
d. All of the above
- end of ToA.1823 -
ToA.1823