- 8 Marks
CR – May 2016 – L3 – Q4c – Share-Based Payments (IFRS 2)
Discuss how the SARs granted by Yerokun Ltd should be accounted for under IFRS 2 and IFRS 13 from the grant date to April 30, 2014.
Question
On May 1, 2011, Yerokun Limited granted 500 share appreciation rights (SARs) to its 300 managers. All of the rights vested on April 30, 2013, but they can be exercised from May 1, 2013, to April 30, 2015. At the grant date, the value of each SAR was ₦10 and it was estimated that 5% of the managers would leave during the vesting period. The fair value of the SARs is as follows:
| Date | Fair Value of SAR |
|---|---|
| April 30, 2012 | ₦9 |
| April 30, 2013 | ₦11 |
| April 30, 2014 | ₦12 |
All of the managers who were expected to leave employment did not leave the company as expected before April 30, 2013. On April 30, 2015, 60 managers exercised their options when the intrinsic value of the right was ₦10.50 and were paid.
Yerokun Limited is confused as to whether to account for SARs under IFRS 2 Share-Based Payment or IFRS 13 Fair Value Measurement and would like to be advised as to how the SARs should have been accounted for from the grant date to April 30, 2014.
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