On 1 July 2012 Lancashire Ltd grants 100 share options to each of its 50 employees conditional upon the employee working for the entity for the next 3 years.On the same date,the entity estimates the fair value of each share option at $15.Based on probability estimates,15 employees are expected to leave the entity in one year and another 5 employees in two years.Actual resignation for the year ending 2013 was 12 employees and the fair value of the option is $12 on 30 June 2014. In accordance with AASB 2,what is the cumulative remuneration expense (related to the share option issue)as at 30 June 2011?
A) $24 000
B) $26 400
C) $33 000
D) $45 000

Question

Quizplus · Accepted Answer

The cumulative remuneration expense as at 30 June 2013 is calculated based on the fair value of the options and the number of employees expected to remain. Initially, 50 employees were granted options, but 15 were expected to leave in the first year, leaving 35 expected to remain. However, only 12 actually left, so 38 employees are expected to remain. The expense for the first year is calculated as 38 employees * 100 options * $15 fair value * 1/3 vesting period = $19,000. For the second year, the expected number of employees is adjusted to 33 (38 - 5 expected to leave in the second year), so the cumulative expense is 33 employees * 100 options * $15 * 2/3 = $33,000.

On 1 July 2012 Lancashire Ltd Grants 100 Share Options