National Ltd. granted 1,000 stock appreciation rights (SAR) each to its 160 employees on 1st April, 2021 with a fair value of 100 each. The terms of…
CA Final · Financial Reporting · PYQS · May 2025
National Ltd. granted 1,000 stock appreciation rights (SAR) each to its 160 employees on 1st April, 2021 with a fair value of 100 each. The terms of the award require the employees to provide service for four years to earn the award. The SARs are expected to be settled in cash and it is expected that 100% of the employees will exercise the options. The fair value of each SAR at each reporting date is as follows: On 31st March, 2022 ₹ 120On 31st March, 2023 ₹ 130On 31st March, 2024 ₹ 135On 31st March, 2025 ₹ 140 (i) You are required to pass necessary journal entries across all the years for recognition of expenses.
Suggested Answer and Working Notes:
(i) Journal Entries in the books of National Ltd. (without modification of service period of stock appreciation rights) (₹ in lakhs) Date Particulars Debit Credit 31.3.2022 Employee Benefit Expenses Dr. 48.00 To Liability for SARs (Being expenses liability for stock appreciation rights recognised) 48.00 31.3.2023 Employee Benefit Expenses Dr. 56.00 To Liability for SARs (Being expenses liability for stock appreciation rights recognised) 56.00 31.3.2024 Employee Benefit Expenses Dr. 58.00 To Liability for SARs (Being expenses liability for stock appreciation rights recognised) 58.00 31.3.2025 Employee Benefit Expenses Dr. 62.00 To Liability for SARs (Being expenses liability for stock appreciation rights recognised) 62.00 Working Note: Calculation of expenses for issue of stock appreciation rights without modification of service period Period Fair value (a) To be Vested (b) Cumulative (₹ ) a x 1000 awards x 160 employees x years of service Expense (₹ ) Start 100 31 st March 2022 120 100% 120 x 1000 x 160 x 1 years / 4 years of service = 48,00,000 48,00,000 31 st March 2023 130 100% 130 x 1000 x 160 x 2 years / 4 years of service = 1,04,00,000 1,04,00,000 - 48,00,000 = 56,00,000 31 st March 2024 135 100% 135 x 1000 x 160 x 3 years / 4 years of service = 1,62,00,000 1,62,00,000 - 1,04,00,000 = 58,00,000 31 st March 2025 140 100% 140 x 1000 x 160 x 4 years / 4 years of service = 2,24,00,000 2,24,00,000 - 1,62,00,000 = 62,00,000
Topics: Ind AS 102
Related Questions in this Topic
- A Ltd. is preparing its financial statements for the year ended 31 March 20X5. During the year, the following transactio...
- C Ltd. prepares its financial statements to 31 March each year. The financial statements are approved for issue on 20 Ma...
- MINDA issued 11,000 share appreciation rights (SARs) that vest immediately to its employees on 1 st April, 20X0. The SA...
- H Ltd. is a parent company and has a subsidiary S Ltd. H Ltd. and S Ltd. are unlisted entities. Following arrangements w...
- Max Ltd. enters into a share-based payment arrangement with its employees on the following terms: Each employee will rec...