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

On 1 January 20X1 Delta Co grants 100 share options to each of its 200 employees, vesting after 3 years of service. The fair value of each option at grant date is $12. At 31 December 20X1 the market price of the shares has risen to $15 and Delta expects 90% of employees to remain to the vesting date. What is the equity-settled share-based payment expense for the year ended 31 December 20X1?

The expense is $72,000. Equity-settled options are measured at grant-date fair value of $12 and not remeasured. Expected options are 18,000, giving a total cost of $216,000, which is spread over the three-year vesting period, so one third is recognised in year one.

  1. A$72,000Correct
  2. B$80,000
  3. C$90,000
  4. D$216,000

Explanation

Equity-settled awards are measured at grant-date fair value and not remeasured. Total expected cost = 200 x 100 x 90% x $12 = $216,000. Year 1 expense = $216,000 x 1/3 = $72,000. Using the year-end price of $15 would give $90,000, which is wrong because there is no remeasurement.

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