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Question 2a

Delta is an entity which prepares financial statements to 31 March each year. Each year the financial statements are authorised for issue on 20 May. The following events are relevant to the year ended 31 March 2016:

Event (a)
On 1 April 2014, Delta granted 2,000 employees 1,000 share options each. The options are due to vest on 31 March 2017 provided the relevant employees remain in employment over the three-year period ending on 31 March 2017.

On 1 April 2014, the directors of Delta estimated that 1,800 employees would qualify for the options on 31 March 2017. This estimate was amended to 1,850 employees on 31 March 2015, and further amended to 1,840 employees on 31 March 2016.

On 1 April 2014, the fair value of an option was $1·20. The fair value increased to $1·30 by 31 March 2015 but, due to challenging trading conditions, the fair value declined after 31 March 2015. On 30 September 2015, when the fair value of an option was 90 cents, the directors repriced the options and this caused the fair value to increase to $1·05. Trading conditions improved in the second half of the year and by 31 March 2016 the fair value of an option was $1·25. Any additional costs that have occurred as a result of the repricing of the options on 30 September 2015 should be spread over the remaining vesting period from 30 September 2015 to 31 March 2017. (9 marks)

Required:
Explain and show (where possible by quantifying amounts) how the three events would be reported in the financial statements of Delta for the year ended 31 March 2016.

Note: The mark allocation is shown against each of the three events above. You should assume that all amounts described here are material. When discussing event (a), you are not required to consider disclosure requirements.