Longreach Ltd grants 100 options to each of its 50 employees on 1 July 2009.Each grant is conditional on the employee working for the company for 3 years.The fair value of each option at grant date is $15. The following information is available:
$$\begin{array} { | l | l | l | }
\hline \text { Year ending 30 June } & \begin{array} { l }
\text { Estimate of departures before the } \
\text { option vests }
\end{array} & \begin{array} { l }
\text { Fair value of option at end of } \
\text { period }
\end{array} \
\hline 2010 & 10 & \$ 14 \
\hline 2011 & 12 & \$ 18 \
\hline 2012 & 14 \text { (actual) } & \$ 20 \
\hline
\end{array}$$
What is the employee benefits expense of Longreach Ltd related to this share option for the year ended 30 June 2010?
A) $18 667
B) $20 000
C) $26 667
D) $56 000

Question

Longreach Ltd grants 100 options to each of its 50 employees on 1 July 2009.Each grant is conditional on the employee working for the company for 3 years.The fair value of each option at grant date is $15. The following information is available:
$$\begin{array} { | l | l | l | } 
\hline \text { Year ending 30 June } & \begin{array} { l } 
\text { Estimate of departures before the } \
\text { option vests }
\end{array} & \begin{array} { l } 
\text { Fair value of option at end of } \
\text { period }
\end{array} \
\hline 2010 & 10 & \$ 14 \
\hline 2011 & 12 & \$ 18 \
\hline 2012 & 14 \text { (actual) } & \$ 20 \
\hline
\end{array}$$
What is the employee benefits expense of Longreach Ltd related to this share option for the year ended 30 June 2010?
A) $18 667
B) $20 000
C) $26 667
D) $56 000

Quizplus · Accepted Answer

The employee benefits expense is calculated as the fair value of the options at grant date multiplied by the number of options granted, less the fair value of the options at the end of the period multiplied by the number of options expected to vest.In this case, the fair value of the options at grant date is $15, the number of options granted is 100, the fair value of the options at the end of the period is $14, and the number of options expected to vest is 90 (100 - 10).Therefore, the employee benefits expense is $15 x 100 - $14 x 90 = $18,667.

Longreach Ltd Grants 100 Options to Each of Its 50