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Share-Based Payment Share Option

The document contains 4 examples of share-based compensation involving share option plans. Each example provides information about the number of shares granted, grant date, exercise price, vesting period, market price on grant date, and fair value. It then asks what the compensation expense for a given year and share premium upon exercise should be based on the details provided.

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Keneth Joe Cabungcal
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430 views1 page

Share-Based Payment Share Option

The document contains 4 examples of share-based compensation involving share option plans. Each example provides information about the number of shares granted, grant date, exercise price, vesting period, market price on grant date, and fair value. It then asks what the compensation expense for a given year and share premium upon exercise should be based on the details provided.

Uploaded by

Keneth Joe Cabungcal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SHARE-BASED COMPENSATION

Share Option

1. In connection with a share option plan for the benefit of key employees, Ward Company intends to
distribute treasury shares when the options are exercised. These shares were previously bought at
P42 per share. The par value per share is P30.
On January 1, 2018, the entity granted share options of 100,000 shares at an option price of P38
per share as additional compensation for services to be rendered over the next three years.
The options are exercisable during a 2-year period beginning January 1, 2021, by grantee still
employed by the entity.
Market price of share was P47 at the grant date.
The fair value of the share option is P12 on grant date. All share options were exercised during
2021.
a) What amount should be reported as compensation expense for 2018?
b) What should be recognized as share premium upon exercise of the share options in 2021?

2. On January 1, 2018, Oak Company granted share options to certain key employees as additional
compensation. The options were for 100,000 ordinary shares of P10 par value at an option price of
P15 per share. Market price of this share on January 1, 2018 was P20. The fair value of each share
option on January 1, 2018 is P8.
The options were exercisable beginning January 1, 2018 and expire on December 31, 2019. On
December 31, 2018, all share options were exercised.
a) What amount of compensation expense should be reported in 2018?
b) What should be recognized as share premium upon exercise of the share options on
December 31, 2018?

3. On June 30, 2018, Newman Company granted compensatory share options for 30,000 P20 par
value ordinary shares to certain key employees. The market price of the share on that date was P36
and the option price was P30.
The Black-Sholes option pricing model measured the total compensation expense to be P5,
400,000. The options are exercisable beginning January 1, 2021, provided that the key employees
are still in entity’s employ at the time the options are exercised. The options exercised on June 30,
2022. On January 15, 2021, when the market price of the share was P42, all 30,000 options were
exercised.
a) What is the compensation for 2020?
b) What is the share premium upon exercise of share options in 2021?

4. On January 1, 2018, Kline Company granted Morgan, the president, comopensati

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