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ACCA Strategic Professional · Strategic Business Reporting (International) · Share-based payment

Brava Co has a cash-settled scheme with a two-year vesting period. The liability at 31 December 20X1 was $300,000. During 20X2 (the vesting date), the SARs were fully vested, no employees left, and the total fair value of the SARs at 31 December 20X2 is $720,000. No cash has yet been paid. What is the expense recognised in profit or loss for 20X2?

The 20X2 expense is $420,000. At the end of the vesting period the liability must equal the full fair value of $720,000, and since $300,000 was already recognised in 20X1, the difference of $420,000 is charged to profit or loss.

  1. A$360,000
  2. B$420,000Correct
  3. C$720,000
  4. D$300,000

Explanation

At the end of the vesting period the liability must equal the full fair value of $720,000. The expense for 20X2 is the movement in the liability: $720,000 - $300,000 = $420,000. The $360,000 option is half of the total, ignoring the cumulative catch-up that reflects the change in fair value in year 1.

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