Rotate Company adopted the following share-based compensation plans for its senior executives. Each senior executive has a unique plan basing on his/her functions in the company. The par value of Rotate’s ordinary share is P20. The following share-based grants were declared by the entity.On January 1, 2021, it granted 1,000 share options each to 200 of its employees. The exercise price of the option is P25. The vesting of said shares is conditional upon the employees staying for three years, after which they have two years to exercise such before the options expire. During 2021, 5 employees resigned and an additional 15 employees are expected to leave on the next two years. During 2022, actual resignations totalled 8 and another 10 is expected to resign next year. No employees left during 2023. Sixty percent of the share options were exercised at yearend 2024 and the balance at yearend 2025.On January 1, 2022, it granted 100 of its employees 1,000 share appreciation rights conditional upon the completion of three years of service and average annual sales increase of more than 5%. If the average annual sales increase is more than 10%, an additional 500 share appreciation rights will be received by the employees. The annual sales increase for 2022, 2023 and 2024 are 11%, 12% and 7%, respectively. The rights were exercised in this manner: 30% on December 31, 2024, 50% on December 31, 2025 and 20% on December 31, 2026.On January 1, 2023, Ultimate Company granted to several employees the right to choose either shares or cash payment. The choices are as follows: Share alternative — equal to 60,000 shares, or Cash alternative — cash payment equal to the market value of 45,000 phantom shares. The grant is conditional upon the completion of three years of service. After taking into account the effect of vesting restrictions, the entity has estimated that the fair value of the share alternative is P28. On December 31, 2026, all of these rights were exercised.On December 31, 2024, an employee was granted 10,000 share options to purchase the entity's shares at P27.50. Such options are exercisable immediately but were only exercised by the employee on the last day of its three-year exercise period.The fair value of the Rotate’s ordinary share are as follows: 202120222023202420252026January 125.0028.0028.5030.0032.0032.50December 3128.0028.5030.0032.0032.5033.50Questions:1. How much is the ending balance of the Accrued Salaries Payable that will show in the 2021 Statement of Financial Position?2. How much is the ending balance of the Share Options Outstanding that will show in the 2021 Statement of Financial Position?3. How much is the net effect of the transactions on the 2021 Statement of Changes in Equity? [Indicate whether it is an increase or decrease]

a) Recognition: As the IFRS 102, the equity-settled share-based payments are recognised at fair…

Answered: 1. How much is the ending balance of…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 6C

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Rotate Company adopted the following share-based compensation plans for its senior executives. Each senior executive has a unique plan basing on his/her functions in the company. The par value of Rotate’s ordinary share is P20. The following share-based grants were declared by the entity.

On January 1, 2021, it granted 1,000 share options each to 200 of its employees. The exercise price of the option is P25. The vesting of said shares is conditional upon the employees staying for three years, after which they have two years to exercise such before the options expire. During 2021, 5 employees resigned and an additional 15 employees are expected to leave on the next two years. During 2022, actual resignations totalled 8 and another 10 is expected to resign next year. No employees left during 2023. Sixty percent of the share options were exercised at yearend 2024 and the balance at yearend 2025.
On January 1, 2022, it granted 100 of its employees 1,000 share appreciation rights conditional upon the completion of three years of service and average annual sales increase of more than 5%. If the average annual sales increase is more than 10%, an additional 500 share appreciation rights will be received by the employees. The annual sales increase for 2022, 2023 and 2024 are 11%, 12% and 7%, respectively. The rights were exercised in this manner: 30% on December 31, 2024, 50% on December 31, 2025 and 20% on December 31, 2026.
On January 1, 2023, Ultimate Company granted to several employees the right to choose either shares or cash payment. The choices are as follows: Share alternative — equal to 60,000 shares, or Cash alternative — cash payment equal to the market value of 45,000 phantom shares. The grant is conditional upon the completion of three years of service. After taking into account the effect of vesting restrictions, the entity has estimated that the fair value of the share alternative is P28. On December 31, 2026, all of these rights were exercised.
On December 31, 2024, an employee was granted 10,000 share options to purchase the entity's shares at P27.50. Such options are exercisable immediately but were only exercised by the employee on the last day of its three-year exercise period.

The fair value of the Rotate’s ordinary share are as follows:

	2021	2022	2023	2024	2025	2026
January 1	25.00	28.00	28.50	30.00	32.00	32.50
December 31	28.00	28.50	30.00	32.00	32.50	33.50

Questions:

1. How much is the ending balance of the Accrued Salaries Payable that will show in the 2021 Statement of Financial Position?

2. How much is the ending balance of the Share Options Outstanding that will show in the 2021 Statement of Financial Position?

3. How much is the net effect of the transactions on the 2021 Statement of Changes in Equity? [Indicate whether it is an increase or decrease]

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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