Page 11 - 20. COMPILER QB - INDAS 102

Q8. (Oct 18 – 6 Marks) – (Similar to Q14)

ABC Ltd. issued 11,000 share appreciation rights (SARs) that vest immediately to its employees on 1 April
2016. The SARs will be settled in cash. Using an option pricing model, at that date it is estimated that the
fair value of a SAR is INR 100. SAR can be exercised any time until 31st March 2019. It is expected that out

of the total employees, 94% at the end of the period on 31st March 2017, 91% at the end of next year will

exercise the option. Finally, when these were vested i.e. at the end of the 3rd year, only 85% of the total
employees exercised the option.

Fair value of SAR INR
31-Mar-2017 132
31-Mar-2018 139

31-Mar-2019 141
Pass the Journal entries?

SOLUTION

Period Fair value To be vested Cumulative Expense
Start 100 100% 11,00,000 11,00,000
Period 1 132 94% 13,64,880 2,64,880

Period 2 139 91% 13,91,390 26,510
Period 3 141 85% 13,18,350 (73,040)

13,18,350

Journal Entries

1-Apr-2016
Employee benefits expenses Dr. 11,00,000
To Share based payment liability (Fair value of 11,00,000
the SAR recognised)
31-Mar-2017
Employee benefits expenses Dr. 2,64,880
To Share based payment liability (Fair value of 2,64,880
the SAR re-measured)
31-Mar-2018
Employee benefits expenses Dr. 26,510

To Share based payment liability (Fair value of 26,510
the SAR re-measured)
31-Mar-2019
Share based payment liability Dr. 73,040
To Employee benefits expenses (Fair value of 73,040
the SAR reversed)
Share based payment liability Dr. 13,18,350
To Cash (Settlement of SAR) 13,18,350
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