Page 27 - 20. COMPILER QB - INDAS 102

Journal Entries

st
31 March, 2018
Employee benefits expenses Dr. 11,00,000
To Share based payment liability 11,00,000
(Fair value of SARs has been recognised)

st
31 March, 2019
Employee benefits expenses Dr. 21,00,000
To Share based payment liability 21,00,000
(Fair value of SARs has been re-measured)

st
31 March, 2020
Employee benefits expenses Dr. 14,00,000
To Share based payment liability 14,00,000
(Fair value of SARs has been recognized)

Q19. (November 20 – 5 Marks)

st
Nest Ltd. issued 10,000 Share Appreciation Rights (SARs) that vest immediately to its employees on April 1 ,
2017. The SARs will be settled in cash. Using an option Pricing model, at that date it is estimated that the

st
fair value of a is ₹100. SAR can be exercised any time until March 31 , 2020. It is expected that out of the
st
total employees, 94% at the end of the period on March 31 , 2018; 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 ₹
st
March 31 , 2018 132
st
March 31 , 2019 139
st
March 31 , 2020 141
You are required to pass the Journal entries to show the effect of the above transaction.

SOLUTION

Table showing amount of expense to be charged each year
Period Fair value To be vested Cumulative Expense
a b c= a x b x 10,000 d = c-prev. period c
1 April 2017 100 100% 10,00,000 10,00,000

31 March 2018 132 94% 12,40,800 2,40,800
31 March 2019 139 91% 12,64,900 24,100
31 March 2020 141 85% 11,98,500 (66,400)
11,98,500

Journal Entries
1 April 2017
Employee benefits expenses Dr. 10,00,000

To Share based payment liability 10,00,000
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