Page 12 - 34.2 FR MARCH 22 MTP ANSWER

1. When the term of the awards is 4 years of service
Period Fair To be Cumulative Expense in Cumulative
value vested proportion to the expenses
award earned recognized
a b c = 40,000 x a x d = [{(c / no. of e
b total years) x
years completed}
– e of pvs year]

1st April, 20X1 100 100% 40,00,000 - -
31st March, 20X2 110 100% 44,00,000 11,00,000 11,00,000
31st March, 20X3 120 100% 48,00,000 13,00,000 24,00,000
31st March, 20X4 115 100% 46,00,000 10,50,000 34,50,000
31st March, 20X5 130 100% 52,00,000 17,50,000 52,00,000

Journal Entries

31st March, 20X2
Employee benefits expenses/Profit and Loss A/c Dr. 11,00,000
To Share based payment liability 11,00,000
(Fair value of SARs has been recognised)
31st March, 20X3
Employee benefits expenses/Profit and Loss A/c Dr. 13,00,000
To Share based payment liability 13,00,000
(Fair value of SARs has been re-measured)

31st March, 20X4
Employee benefits expenses/Profit and Loss A/c Dr. 10,50,000
To Share based payment liability 10,50,000
(Fair value of SARs has been recognized)
31st March, 20X5
Employee benefits expenses A/c Dr. 17,50,000
To Share based payment liability 17,50,000
(Fair value of SARs has been recognized)

2. When the term of the awards is modified to 3 years of service instead of 4 years of service

Period Fair %age of Cumulative Expense in Cumulative
value vesting proportion to the expenses
award earned recognized
a b c = 40,000 x a x b d = [{(c / no. of e
total years) x years
completed}
– e of pvs year]
1st April, 20X1 100 100% 40,00,000 - -
31st March, 20X2 110 100% 44,00,000 11,00,000 11,00,000

31st March, 20X3 120 100% 48,00,000 21,00,000 32,00,000
31st March, 20X4 115 100% 46,00,000 14,00,000 46,00,000
.

34.18