Page 20 - 20. COMPILER QB - INDAS 102

QUESTIONS FROM PAST EXAM PAPERS

Q15. (May 18 – 10 Marks)

ABC Limited issued 20,000 Share Appreciation Rights (SARs) that vest immediately to its employees on 1st
April 2015. The SARs will be settled in cash. At that date it is estimated using an option pricing model, that

the fair value of a SAR is Rs 95. SAR can be exercised any time up to 31st March 2018. At the end of 31st
March 2016 it is expected that 95% of total employees will exercise the option, 92% of total employees will

exercise the option at the end of next year and finally 89% will be vested only at the end of the 3rd year.
Fair values at the end of each period have been given below:

Fair value of SAR Rs
31st March, 2016 110
31st March, 2017 107

31st March, 2018 112
Discuss the applicability of Cash Settled Share based payments under the relevant Ind AS and pass

the journal entries.

SOLUTION

Applicability of cash settled share-based payment transactions
For cash-settled share-based payment transactions, the entity shall measure the goods or services acquired

and the liability incurred at the fair value of the liability.

1. When vesting conditions are attached to the share based payment plans
The recognition of such share based payment plans should be done by recognizing the fair value of the

liability at the time of goods/ services received and not at the date of grant.
2. When no vesting period / condition is attached or to be fulfilled

Cash settled share based payment can be recognized in full at initial recognition itself.
Until the liability is settled, the entity shall remeasure the fair value of the liability at the end of each

reporting period date and difference in fair value will be charged to profit or loss for the period as
employee benefit expenses.

At the date of settlement, the liability is paid in cash based on the fair value on the date of settlement.

Calculation of expenses recognized during the year on account of change in the fair value of SARs
Period Fair valve To be Cumulative Expense / (benefit) for

vested expenses the current year
A B c = a x b x 20,000 d = c-of current period
– c of previous period

1st April, 2015 95 100% 19,00,000 19,00,000
31 March, 2016 110 95% 20,90,000 1,90,000
st
20. 19