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

On 1 January 20X1 Delta Group's parent grants cash-settled share appreciation rights to 100 employees of its subsidiary. Each employee receives 200 rights vesting after 2 years. Subsidiary has no obligation to pay; the parent settles in cash. Fair value per right is $6 at 31 December 20X1; 90 employees are expected to stay. In the consolidated financial statements for 20X1, what is the expense and liability?

The consolidated expense and liability are both $54,000. Cash-settled rights are remeasured at fair value: 90 employees x 200 rights x $6 = $108,000, and half is recognised after one of two vesting years. The group has a liability because the parent settles in cash.

  1. AExpense $54,000; liability $54,000Correct
  2. BExpense $108,000; liability $108,000
  3. CExpense $54,000; equity increase $54,000
  4. DExpense $0; liability $0

Explanation

Cash-settled awards are measured at fair value at each reporting date and accrued over the vesting period. 90 x 200 x $6 = $108,000 total; one of two years elapsed, so 1/2 x $108,000 = $54,000. In the consolidated statements, the group has a cash obligation, so it recognises a liability and an expense. Recognising the full $108,000 ignores the time apportionment.

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