The following information relates to questions
On 1 July 2013 Fantasy Ltd granted 200 options to each of its 100 employees. The share options will vest on 30 June 2015 if the employees remain employed with the company on that date. The share options have a life of four years. The exercise price is $5, which is also Fantasy's share price at the grant date. Fantasy is unable to reliably estimate the fair value of the share options at the grant date.
Fantasy's share price and the number of options exercised are set out below. Share options may only be exercised at year end.
$$\begin{array} { | l | l | l | }
\hline \text { Year ended } & \begin{array} { l }
\text { Share price } \
\text { at year end }
\end{array} & \begin{array} { l }
\text { Number of aptions } \
\text { exercised at year end }
\end{array} \
\hline \text { 30 June } 2014 & \$ 6 & - \
\hline \text { 30 June } 2015 & \$ 7 & - \
\hline \text { 30 June } 2016 & \$ 8 & 7,800 \
\hline \text { 30 June } 2017 & \$ 9 & 10,000\
\hline
\end{array}$$
-The cumulative remuneration expense to be recognised by Fantasy as at 30 June 2015 is:
A) $7800
B) $17 800
C) $35 600
D) $124 600

Question

The following information relates to questions 
On 1 July 2013 Fantasy Ltd granted 200 options to each of its 100 employees. The share options will vest on 30 June 2015 if the employees remain employed with the company on that date. The share options have a life of four years. The exercise price is $5, which is also Fantasy's share price at the grant date. Fantasy is unable to reliably estimate the fair value of the share options at the grant date.
Fantasy's share price and the number of options exercised are set out below. Share options may only be exercised at year end.
 $$\begin{array} { | l | l | l | } 
\hline \text { Year ended } & \begin{array} { l } 
\text { Share price } \
\text { at year end }
\end{array} & \begin{array} { l } 
\text { Number of aptions } \
\text { exercised at year end }
\end{array} \
\hline \text { 30 June } 2014 & \$ 6 & - \
\hline \text { 30 June } 2015 & \$ 7 & - \
\hline \text { 30 June } 2016 & \$ 8 & 7,800 \
\hline \text { 30 June } 2017 & \$ 9 & 10,000\
\hline
\end{array}$$
-The cumulative remuneration expense to be recognised by Fantasy as at 30 June 2015 is:
A) $7800
B) $17 800
C) $35 600
D) $124 600

Quizplus · Accepted Answer

The cumulative remuneration expense is calculated based on the fair value of the options expected to vest. Since the fair value cannot be reliably estimated, the intrinsic value method might be used, which is the difference between the share price at the grant date ($5) and the exercise price ($5), which is $0. However, for accounting purposes, the expense recognized should be based on the grant date fair value, spread over the vesting period. Since the fair value is not given, we assume the expense is based on the number of options expected to vest. With 200 options granted to each of the 100 employees, a total of 20,000 options were granted. By 30 June 2015, none have been exercised, but all could vest if employees remain. Without a given fair value, we cannot calculate the exact expense based on the information provided. However, the question seems to aim at understanding the accounting treatment rather than the exact calculation. Therefore, without specific fair value data, we cannot determine the exact expense, but it would be recognized over the vesting period, which is from the grant date to 30 June 2015. The correct answer would typically depend on the fair value at the grant date, multiplied by the number of options expected to vest, and recognized over the vesting period. Since none of the provided options can be directly calculated from the given data, and assuming a misunderstanding in the question's intent, the closest approach to answering involves acknowledging the process of recognizing expense over the vesting period without a specific fair value provided.

The Following Information Relates to Questions on 1 July

The Following Information Relates to Questions
on 1 July