ACCA Strategic Professional · Strategic Business Reporting (International) · Share-based payment
On 1 January 20X1 Orion Co grants 500 SARs to each of 100 managers, vesting after three years of service, settled in cash. Fair value of one SAR is $12 at 31 December 20X1. At that date Orion expects 10% of managers to leave before vesting. What is the expense and liability recognised for the year ended 31 December 20X1?
The expense and liability are $180,000. Expected SARs are 90 managers times 500, equal to 45,000, valued at the current fair value of $12 giving $540,000, and one third is recognised because one of three vesting years has elapsed.
- A$180,000Correct
- B$540,000
- C$200,000
- D$60,000
Explanation
Expected vesting: 100 x 90% = 90 managers x 500 SARs = 45,000 SARs. At $12 = $540,000 total; one third accrued after one of three years = $180,000. Option $540,000 ignores the vesting period proportion. Option $200,000 ignores expected leavers ($600,000 x 1/3).
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