(ii) Would your answer be different, if at the end of the second year of service i.e. at 31st March, 2023, National Ltd. modifies the terms of the…

CA Final · Financial Reporting · PYQS · May 2025
(ii) Would your answer be different, if at the end of the second year of service i.e. at 31st March, 2023, National Ltd. modifies the terms of the award to require only three years of total service instead of 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. Pass revised journal entries.

Suggested Answer and Working Notes:

(ii) Journal Entries in the books of National Ltd. (with modification of service period of stock appreciation rights) (₹ in lakhs) Date Particulars Debit Credit 31.03.2023 Employee Benefit Expenses Dr. 90.67 To Liability for SARs (Being expenses liability for stock appreciation rights recognised) 90.67 31.03.2024 Employee Benefit Expenses Dr. 77.33 To Liability for SARs (Being expenses liability for stock appreciation rights recognised) 77.33 Working Note: Calculation of expenses for issue of stock appreciation rights with 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 (₹ ) 1 st April, 2021 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 / 3 years of service = 1,38,66,667 1,38,66,667 – 48,00,000 = 90,66,667 31 st March 2024 135 100% 135 x 1000 x 160 x 3 years / 3 years of service = 2,16,00,000 2,16,00,000 – 1,38,66,667 = 77,33,333

Topics: Ind AS 102

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