DipIFR Syllabus B. Elements of financial statements - SBP - Cash Settled - Past Papers ^{3 / 7}

December 2016

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Question 2c

Delta is an entity which prepares financial statements to 30 September each year. The financial statements for the year ended 30 September 2016 are shortly to be authorised for issue. The following events are relevant to these financial statements:

(c) On 1 October 2014, Delta granted 250 share appreciation rights to 100 senior executives. The rights vest on 30 September 2017 provided the executives remain with Delta for the three-year period from 1 October 2014 to 30 September 2017. The rights can be exercised from 30 November 2017 to 31 December 2017. On 1 October 2014, it was expected that 10 executives would leave over the three-year period from 1 October 2014 to 30 September 2017. This estimate was confirmed on 30 September 2015 but two executives left unexpectedly during the year ended 30 September 2016 and Delta now expects that 12 executives will leave over the three-year period ending on 30 September 2017. Delta further estimated that all executives who were eligible to exercise the rights would do so. On 1 October 2014, the fair value of a share appreciation right was $3·20. The fair value increased to $3·50 by 30 September 2015 and to $3·60 by 30 September 2016.

(5 marks)

Required:
Explain and show how the three events would be reported in the financial statements of Delta for the year ended 30 September 2016.

Notes:
1. The mark allocation is shown against each of the three events above.
2. In explaining event (b), you do not need to consider the impact on inventory and cost of sales.

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June 2015

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Question 3b ii

Kappa prepares financial statements to 31 March each year. The following share-based payment arrangements were in force during the year ended 31 March 2015: (ii) On 1 April 2013, Kappa granted share appreciation rights to 50 senior employees. The number of rights to which each employee becomes entitled depends on the cumulative profit of Kappa for the three years ended 31 March 2016: – 1,000 rights per employee are awarded if the cumulative profit for the three-year period is below $500,000. – 1,500 rights per employee are awarded if the cumulative profit for the three-year period is between $500,000 and $1 million. – 2,000 rights per employee are awarded if the cumulative profit for the three-year period exceeds $1 million. On 1 April 2013, Kappa expected that the cumulative profits for the three-year period would be $800,000. After the disappointing financial results for the year ended 31 March 2014, this estimate was revised at that time to $450,000. However, given the improvement in results for the year ended 31 March 2015, the estimate was revised again at 31 March 2015 to $1,100,000. On 1 April 2013, the fair value of one share appreciation right was $1·10. This estimate was revised to $0·90 at 31 March 2014 and to $1·20 at 31 March 2015. All the senior employees are expected to remain employed by Kappa for the relevant three-year period. The rights are exercisable on 30 June 2016. (5 marks) Required: Show how and where transactions (i) and (ii) would be reported in the financial statements of Kappa for the year ended 31 March 2015. Note: The mark allocation is shown against both of the two transactions above. Ignore deferred tax.

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June 2014

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Question 2a

Delta is an entity which prepares financial statements to 31 March each year. During the year ended 31 March 2014 the following events affected Delta:

(a) On 1 April 2012, Delta had granted share appreciation rights to 200 senior executives. Each executive will receive 2,000 rights on 31 March 2015 provided he or she continues to be employed by Delta at that date. On 1 April 2012, the directors estimated that all the executives would remain employed by Delta for the three-year period ending on 31 March 2015. However, 10 executives left in the year ended 31 March 2013 and at 31 March 2013 the directors believed that a further 10 executives would leave in the following two years. Five executives actually left in the year ended 31 March 2014 and the directors now believe that seven more directors will leave in the year ended 31 March 2015. Since 1 April 2012, the fair value of the share appreciation rights has fluctuated as follows:

Date	Fair value of one right
	$
1 April 2012	1·60
31 March 2013	1·80
31 March 2014	1·74

(8 marks)

Required:
Explain and illustrate (where possible by quantifying amounts) how the three events would be reported in the financial statements of Delta for the year ended 31 March 2014.

Note: The mark allocation is shown against each of the three events above.

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