Question Tag: Employee Benefits

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CR – Nov 2024 – L3 – Q3a – Share-Based Payment and Contingent Liabilities

Accounting for share-based payments and contingent liabilities in financial statements.

Question

(i) Share-Based Payment

Pee Manka PLC (PM), a hyper-growing firm in Ghana, prepares its financial statements on 31 December.

The following information is relevant:

The financial statements are authorised for issue on 31 March. On 31 December 2021, PM issued share options to seven (7) of its senior executives, giving each executive the option to purchase 2 million shares at GH¢6.50 per share. The fair value of each option at that date was GH¢4.00. The exercise of the share options was conditional on the completion of two-years’ service from 31 December 2021.

The company’s share price on subsequent dates was as follows:

Date	Share Price (GH¢)
31 December 2022	13.50
31 December 2023	17.50

On 31 March 2023, after the 2022 financial statements were authorised for issue, PM’s Chief Finance Officer, one of the seven executives, unexpectedly resigned from her position in the company.
On 30 April 2023 another executive, Mrs. Torsah, was dismissed.
The five remaining executives exercised their options on 31 December 2023.

Required:

In line with IFRS 2: Share-Based Payment, recommend how the above scenario would have been dealt with in the financial statements of PM for the year ended 31 December 2023. (6 marks)

(ii) Contingent Liabilities and Share-Based Payment

Mrs. Torsah, who was dismissed, immediately instigated legal proceedings against PM, and it was probable, on the 28 February 2024, that she would be deemed to have completed the two-year qualifying period of her share option agreement.
Legal advice at that time was that she was also likely to be awarded GH¢3.5 million in compensation, and that it was possible that this could rise to GH¢5.8 million.

Required:

In line with IFRS 2: Share-Based Payment and IAS 37: Provisions, Contingent Liabilities and Contingent Assets, explain how the above scenario would impact your results in (i) above.

Answer

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Tags: Contingent Liabilities, Employee Benefits, IAS 37, IFRS 2, Legal claims, Share Options
Level: Level 3

Topic: IAS 37: Provisions, Contingent Liabilities and Contingent Assets, IFRS 2: Share-Based Payments
Series: Nov 2024

CR – Nov 2024 – L3 – Q2c – Accounting for Defined Benefit Pension Plans

Compute the pension amounts for Oboisah PLC under IAS 19.

Question

Oboisah PLC (Oboisah) operates a defined benefit pension plan for employees who commenced employment with the company prior to 1 April 2021. The pension scheme is non-contributory.

At 31 March 2023, the Group recorded a net defined liability of GH¢157 million. The following information relates to the year ended 31 March 2024:

Description	Amount (GH¢ million)
Employer contributions paid on 31 March 2024	43
Benefits paid	16
Current service cost	42
Curtailment gain	3
Present value of defined benefit obligation at 31 March 2024	498
Value of plan assets at 31 March 2024	315

The average yield on relevant corporate bonds was 20% on 1 April 2023. Entries so far made in respect of the employer contributions have been incorrectly debited to accounts receivable and credited to cash. Benefits paid have been correctly recorded.

Required:

In line with IAS 19: Employee Benefits, determine how much pension amounts should be included in the financial statements of Oboisah PLC for the year ended 31 March 2024. Show the appropriate extracts for the above and any correction entries, if necessary.

Answer

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Tags: Defined Benefit Plan, Employee Benefits, Financial Reporting, IAS 19, Pension Obligation
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: Nov 2024

CR – Nov 2018 – L3 – SB – Q2 – Share-Based Payments (IFRS 2)

Examination of KutuKutu Plc.'s share-based payment policies and transactions under IFRS 2

Question

(1) KutuKutu Plc. has a policy in place to pay its employees a performance bonus. This bonus is to be paid in cash and is unrelated to the movement in its share price. KutuKutu Plc. has the choice of settling the bonus in cash or in equity shares to the value of the cash bonus. Based on bonuses paid in prior years, KutuKutu Plc. has always settled the bonuses of qualified employees in shares.

(2) KutuKutu Plc. grants one share option to each of its 50 employees on January 1, 2016. The share options will vest at the end of 2 years provided that:

The employees remain in KutuKutu Plc.’s employment at that date; and
The Earnings before Interest, Tax, Depreciation, and Amortisation (EBITDA) of KutuKutu Plc. for the second year achieves a specified target.

At the grant date, each recipient is required to make a non-refundable cash payment of N2,000 to KutuKutu Plc. This payment is based on the estimated fair value (FV) of the share option which reflects the probability that the target EBITDA will be achieved in the second year. FV of each option would be N250 (excluding the effect of the EBITDA condition).

If KutuKutu Plc. does not achieve the target EBITDA or if an employee leaves the employment of KutuKutu Plc., no shares will be issued, and the employee will not be entitled to a repayment. Accordingly, both service and non-market vesting conditions are deemed to be substantive.

Required:

a. Do the transactions entered into in (1) above meet the definition of equity-settled share-based payment transactions within the scope of IFRS 2? (8 Marks)

b. How should the transaction in (2) above be accounted for? (12 Marks)

Answer

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Tags: Cash-Settled Transactions, Employee Benefits, Equity-Settled Transactions, Financial Reporting, IFRS 2, Share-Based Payments
Level: Level 3

Topic: Share-Based Payments (IFRS 2)

CSME – May 2023 – L1 – SB – Q5 – Ethics in Business

Differences between creative and critical thinking and their impact on employer benefits.

Question

Creative and critical thinking are essential skills that chartered accountants should possess for optimal performance.

(a) Differentiate between creative and critical thinking. (4 Marks)

(b) Explain the modes through which creative thinking is expressed. (8 Marks)

(c) Explain how the creative thinking of employees benefits their employers. (3 Marks)

Answer

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Tags: Analytical Skills, Creative Thinking, Critical Thinking, Employee Benefits, Professional Skills
Level: Level 2

Topic: Ethics in Business
Series: MAY 2023

CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

Question

Nzema prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) with a financial year end of 31 December 2018. On 1 January 2018, Nzema commenced a defined benefit pension plan for a number of head office employees. Under the pension scheme, Nzema has an obligation to provide these staff with agreed post-employment benefits. Nzema carries the actuarial and investment risk associated with the pension scheme.

The following information has been compiled from workings by Nzema’s accounting staff and actuarial reports for the 2018 financial year:

GH¢
Interest income on plan assets	16,500
Employer contributions to plan	550,000
Current service cost	600,000
Interest on plan liability	18,000
Fair value of plan assets at 31/12/2018	580,000
Present value of plan obligation at 31/12/2018	620,000

The Accountant was not sure which accounting standard to apply when accounting for the pension scheme. The only adjustment made to account for the scheme was to expense the company’s contributions of GH¢550,000 for the 2018 financial year in the Statement of Profit or Loss and Other Comprehensive Income and to credit the ‘Cash’ account.

Required:
Recommend, with appropriate calculations, the necessary accounting treatment for this accounting issue.

Answer

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Tags: Actuarial Gains/Losses, Defined Benefit Plan, Employee Benefits, Interest on Plan Liability, Pension Liability
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: MAY 2020

BL – May 2015 – L1 – SB – Q6e – Employment Law

Identify situations when an employee is entitled to redundancy benefits.

Question

State any THREE instances in which an employee may be entitled to redundancy benefits. (3 Marks)

Answer

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Tags: Business Law, Employee Benefits, Employment Contracts, Employment Law, Labor Law, Redundancy
Level: Level 1

Topic: Employment law
Series: MAY 2015

PT – April 2022 – L2 – Q3a – Income Tax Liabilities

Explain the tax treatment for overtime allowance and bonus payments in Ghana.

Question

a) Explain the tax treatment for Overtime Allowance Payment and Bonus Payment.
(6 marks)

Answer

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Tags: Bonus payment, Employee Benefits, Income Tax, Overtime payment, Taxation

Topic: Income Tax Liabilities
Series: APR 2022

PT – April 2022 – L2 – Q3c – Income Tax Liabilities

Determine the tax implication of overtime allowance paid to Bawa in February 2021.

Question

c) Bawa is a junior staff member of Blinks Ltd. Her monthly basic salary is GH¢2,000. She was paid an overtime allowance totalling GH¢500 during the month of February 2021.

Required:
What is the tax implication of the overtime allowance paid?
(3 marks)

Answer

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Tags: Employee Benefits, Income Tax, Overtime payment, Taxation of income

Topic: Employment Income, Income Tax Liabilities, Taxation of Overtime
Series: APR 2022

PT – April 2022 – L2 – Q3d – Income Tax Liabilities

Calculate the tax liability on Eunice Danso's bonus income for 2021.

Question

Eunice Danso works with Gyidi Ltd and earns an annual basic salary of GH¢50,000. She was paid a bonus of GH¢6,000 in 2021.

Required:
Determine the tax liability on the bonus. (3 marks)

Answer

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Tags: Bonus payment, Employee Benefits, Income Tax, Tax computation, Tax implications

Topic: Bonus Payment Taxation, Employment Income, Individual Taxation, Tax Calculation
Series: APR 2022

PT – July 2023 – L2 – Q3a – Income Tax Liabilities

Calculation of loan benefits for three employees based on their loan details and income.

Question

The table below shows the incomes of three employees of Agana Ltd in 2022 year of assessment.

Income Details	Adom	Aseda	Ayeyie
Basic Salary (GH¢)	120,000	160,000	180,000
Medical Allowance (5% of Basic Salary)	6,000	8,000	9,000
Rent Allowance (10% of Basic Salary)	12,000	16,000	18,000
Fuel Allowance (15% of Basic Salary)	18,000	24,000	27,000
Total Cash Emoluments	156,000	208,000	234,000

Besides the cash emoluments stated above, the employees received loans from the employer as follows:

i) Adom received a loan of GH¢24,000 at a rate of 5% payable within 12 months.
ii) Aseda received a loan of GH¢48,000 at a rate of 8% payable within 24 months.
iii) Ayeyie received a loan of GH¢100,000 at a rate of 10% payable within 36 months. This loan is in addition to an outstanding loan of GH¢50,000 with the same terms and conditions during the previous twelve months. (Assume that the statutory rate is 30% per annum).

Required:
Determine the loan benefits applicable to each of the three employees for the 2022 year of assessment. (16 marks)

Answer

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Tags: Employee Benefits, Employment Income, Income Tax, Loan Benefits, Tax computation
Level: Level 2

Topic: Income Tax Liabilities
Series: JULY 2023

CR – Nov 2024 – L3 – Q3a – Share-Based Payment and Contingent Liabilities

Accounting for share-based payments and contingent liabilities in financial statements.

Question

(i) Share-Based Payment

Pee Manka PLC (PM), a hyper-growing firm in Ghana, prepares its financial statements on 31 December.

The following information is relevant:

The financial statements are authorised for issue on 31 March. On 31 December 2021, PM issued share options to seven (7) of its senior executives, giving each executive the option to purchase 2 million shares at GH¢6.50 per share. The fair value of each option at that date was GH¢4.00. The exercise of the share options was conditional on the completion of two-years’ service from 31 December 2021.

The company’s share price on subsequent dates was as follows:

Date	Share Price (GH¢)
31 December 2022	13.50
31 December 2023	17.50

On 31 March 2023, after the 2022 financial statements were authorised for issue, PM’s Chief Finance Officer, one of the seven executives, unexpectedly resigned from her position in the company.
On 30 April 2023 another executive, Mrs. Torsah, was dismissed.
The five remaining executives exercised their options on 31 December 2023.

Required:

In line with IFRS 2: Share-Based Payment, recommend how the above scenario would have been dealt with in the financial statements of PM for the year ended 31 December 2023. (6 marks)

(ii) Contingent Liabilities and Share-Based Payment

Mrs. Torsah, who was dismissed, immediately instigated legal proceedings against PM, and it was probable, on the 28 February 2024, that she would be deemed to have completed the two-year qualifying period of her share option agreement.
Legal advice at that time was that she was also likely to be awarded GH¢3.5 million in compensation, and that it was possible that this could rise to GH¢5.8 million.

Required:

In line with IFRS 2: Share-Based Payment and IAS 37: Provisions, Contingent Liabilities and Contingent Assets, explain how the above scenario would impact your results in (i) above.

Answer

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Tags: Contingent Liabilities, Employee Benefits, IAS 37, IFRS 2, Legal claims, Share Options
Level: Level 3

Topic: IAS 37: Provisions, Contingent Liabilities and Contingent Assets, IFRS 2: Share-Based Payments
Series: Nov 2024

CR – Nov 2024 – L3 – Q2c – Accounting for Defined Benefit Pension Plans

Compute the pension amounts for Oboisah PLC under IAS 19.

Question

Oboisah PLC (Oboisah) operates a defined benefit pension plan for employees who commenced employment with the company prior to 1 April 2021. The pension scheme is non-contributory.

At 31 March 2023, the Group recorded a net defined liability of GH¢157 million. The following information relates to the year ended 31 March 2024:

Description	Amount (GH¢ million)
Employer contributions paid on 31 March 2024	43
Benefits paid	16
Current service cost	42
Curtailment gain	3
Present value of defined benefit obligation at 31 March 2024	498
Value of plan assets at 31 March 2024	315

Required:

Answer

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Tags: Defined Benefit Plan, Employee Benefits, Financial Reporting, IAS 19, Pension Obligation
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: Nov 2024

CR – Nov 2018 – L3 – SB – Q2 – Share-Based Payments (IFRS 2)

Examination of KutuKutu Plc.'s share-based payment policies and transactions under IFRS 2

Question

(2) KutuKutu Plc. grants one share option to each of its 50 employees on January 1, 2016. The share options will vest at the end of 2 years provided that:

The employees remain in KutuKutu Plc.’s employment at that date; and
The Earnings before Interest, Tax, Depreciation, and Amortisation (EBITDA) of KutuKutu Plc. for the second year achieves a specified target.

Required:

a. Do the transactions entered into in (1) above meet the definition of equity-settled share-based payment transactions within the scope of IFRS 2? (8 Marks)

b. How should the transaction in (2) above be accounted for? (12 Marks)

Answer

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Tags: Cash-Settled Transactions, Employee Benefits, Equity-Settled Transactions, Financial Reporting, IFRS 2, Share-Based Payments
Level: Level 3

Topic: Share-Based Payments (IFRS 2)

CSME – May 2023 – L1 – SB – Q5 – Ethics in Business

Differences between creative and critical thinking and their impact on employer benefits.

Question

Creative and critical thinking are essential skills that chartered accountants should possess for optimal performance.

(a) Differentiate between creative and critical thinking. (4 Marks)

(b) Explain the modes through which creative thinking is expressed. (8 Marks)

(c) Explain how the creative thinking of employees benefits their employers. (3 Marks)

Answer

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Tags: Analytical Skills, Creative Thinking, Critical Thinking, Employee Benefits, Professional Skills
Level: Level 2

Topic: Ethics in Business
Series: MAY 2023

CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

Question

The following information has been compiled from workings by Nzema’s accounting staff and actuarial reports for the 2018 financial year:

GH¢
Interest income on plan assets	16,500
Employer contributions to plan	550,000
Current service cost	600,000
Interest on plan liability	18,000
Fair value of plan assets at 31/12/2018	580,000
Present value of plan obligation at 31/12/2018	620,000

Required:
Recommend, with appropriate calculations, the necessary accounting treatment for this accounting issue.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Actuarial Gains/Losses, Defined Benefit Plan, Employee Benefits, Interest on Plan Liability, Pension Liability
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: MAY 2020

BL – May 2015 – L1 – SB – Q6e – Employment Law

Identify situations when an employee is entitled to redundancy benefits.

Question

State any THREE instances in which an employee may be entitled to redundancy benefits. (3 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business Law, Employee Benefits, Employment Contracts, Employment Law, Labor Law, Redundancy
Level: Level 1

Topic: Employment law
Series: MAY 2015

PT – April 2022 – L2 – Q3a – Income Tax Liabilities

Explain the tax treatment for overtime allowance and bonus payments in Ghana.

Question

a) Explain the tax treatment for Overtime Allowance Payment and Bonus Payment.
(6 marks)

Answer

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Tags: Bonus payment, Employee Benefits, Income Tax, Overtime payment, Taxation

Topic: Income Tax Liabilities
Series: APR 2022

PT – April 2022 – L2 – Q3c – Income Tax Liabilities

Determine the tax implication of overtime allowance paid to Bawa in February 2021.

Question

c) Bawa is a junior staff member of Blinks Ltd. Her monthly basic salary is GH¢2,000. She was paid an overtime allowance totalling GH¢500 during the month of February 2021.

Required:
What is the tax implication of the overtime allowance paid?
(3 marks)

Answer

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Tags: Employee Benefits, Income Tax, Overtime payment, Taxation of income

Topic: Employment Income, Income Tax Liabilities, Taxation of Overtime
Series: APR 2022

PT – April 2022 – L2 – Q3d – Income Tax Liabilities

Calculate the tax liability on Eunice Danso's bonus income for 2021.

Question

Eunice Danso works with Gyidi Ltd and earns an annual basic salary of GH¢50,000. She was paid a bonus of GH¢6,000 in 2021.

Required:
Determine the tax liability on the bonus. (3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bonus payment, Employee Benefits, Income Tax, Tax computation, Tax implications

Topic: Bonus Payment Taxation, Employment Income, Individual Taxation, Tax Calculation
Series: APR 2022

PT – July 2023 – L2 – Q3a – Income Tax Liabilities

Calculation of loan benefits for three employees based on their loan details and income.

Question

The table below shows the incomes of three employees of Agana Ltd in 2022 year of assessment.

Income Details	Adom	Aseda	Ayeyie
Basic Salary (GH¢)	120,000	160,000	180,000
Medical Allowance (5% of Basic Salary)	6,000	8,000	9,000
Rent Allowance (10% of Basic Salary)	12,000	16,000	18,000
Fuel Allowance (15% of Basic Salary)	18,000	24,000	27,000
Total Cash Emoluments	156,000	208,000	234,000

Besides the cash emoluments stated above, the employees received loans from the employer as follows:

Required:
Determine the loan benefits applicable to each of the three employees for the 2022 year of assessment. (16 marks)

Answer

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Tags: Employee Benefits, Employment Income, Income Tax, Loan Benefits, Tax computation
Level: Level 2

Topic: Income Tax Liabilities
Series: JULY 2023

Question Tag: Employee Benefits

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CR – Nov 2024 – L3 – Q3a – Share-Based Payment and Contingent Liabilities

Accounting for share-based payments and contingent liabilities in financial statements.

(i) Share-Based Payment

Required:

(ii) Contingent Liabilities and Share-Based Payment

Required:

CR – Nov 2024 – L3 – Q2c – Accounting for Defined Benefit Pension Plans

Compute the pension amounts for Oboisah PLC under IAS 19.

Required:

CR – Nov 2018 – L3 – SB – Q2 – Share-Based Payments (IFRS 2)

Examination of KutuKutu Plc.'s share-based payment policies and transactions under IFRS 2

CSME – May 2023 – L1 – SB – Q5 – Ethics in Business

Differences between creative and critical thinking and their impact on employer benefits.

CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

BL – May 2015 – L1 – SB – Q6e – Employment Law

Identify situations when an employee is entitled to redundancy benefits.

PT – April 2022 – L2 – Q3a – Income Tax Liabilities

Explain the tax treatment for overtime allowance and bonus payments in Ghana.

PT – April 2022 – L2 – Q3c – Income Tax Liabilities

Determine the tax implication of overtime allowance paid to Bawa in February 2021.

PT – April 2022 – L2 – Q3d – Income Tax Liabilities

Calculate the tax liability on Eunice Danso's bonus income for 2021.

PT – July 2023 – L2 – Q3a – Income Tax Liabilities

Calculation of loan benefits for three employees based on their loan details and income.

CR – Nov 2024 – L3 – Q3a – Share-Based Payment and Contingent Liabilities

Accounting for share-based payments and contingent liabilities in financial statements.

(i) Share-Based Payment

Required:

(ii) Contingent Liabilities and Share-Based Payment

Required:

CR – Nov 2024 – L3 – Q2c – Accounting for Defined Benefit Pension Plans

Compute the pension amounts for Oboisah PLC under IAS 19.

Required:

CR – Nov 2018 – L3 – SB – Q2 – Share-Based Payments (IFRS 2)

Examination of KutuKutu Plc.'s share-based payment policies and transactions under IFRS 2

CSME – May 2023 – L1 – SB – Q5 – Ethics in Business

Differences between creative and critical thinking and their impact on employer benefits.

CR – May 2020 – L3 – Q2c – Defined Benefit Pension Plan

Recommend the accounting treatment for a defined benefit pension plan with supporting calculations.

BL – May 2015 – L1 – SB – Q6e – Employment Law

Identify situations when an employee is entitled to redundancy benefits.

PT – April 2022 – L2 – Q3a – Income Tax Liabilities

Explain the tax treatment for overtime allowance and bonus payments in Ghana.

PT – April 2022 – L2 – Q3c – Income Tax Liabilities

Determine the tax implication of overtime allowance paid to Bawa in February 2021.

PT – April 2022 – L2 – Q3d – Income Tax Liabilities

Calculate the tax liability on Eunice Danso's bonus income for 2021.

PT – July 2023 – L2 – Q3a – Income Tax Liabilities

Calculation of loan benefits for three employees based on their loan details and income.

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