Ankita Holding Inc. grants 100 shares to each of its 500 employees on 1st January, 20X1. The employees should remain in service during the vesting…

CA Final · Financial Reporting · MTP · September 2025
Ankita Holding Inc. grants 100 shares to each of its 500 employees on 1st January, 20X1. The employees should remain in service during the vesting period. The shares will vest at the end of the First year if the company's earnings increase by 12%;Second year if the company's earnings increase by more than 20% over the two-year period;Third year if the entity's earnings increase by more than 22% over the three-year period. The fair value per share at the grant date is 122. In 20X1, earnings increased by 10%, and 29 employees left the organisation. The company expects that the shares will vest at the end of the year 20X2. The company also expects that additional 31 employees will leave the organisation in the year 20X2 and that 440 employees will receive their shares at the end of the year 20X2. At the end of 20X2, company's earnings increased by 18%. Therefore, the shares did not vest. Only 29 employees left the organization during 20X2. Company believes that additional 23 employees will leave in 20X3 and earnings will further increase so that the performance target will be achieved in 20X3. At the end of the year 20X3, only 21 employees have left the organization. Assume that the company's earnings increased to desired level and the performance target has been met. Determine the expense for each year and pass appropriate journal entries?

Suggested Answer and Working Notes:

Since the earnings of the entity is non-market related, hence it will not be considered in fair value calculation of the shares given. However, the same will be considered while calculating number of shares to be vested. Workings: 20 X1 20 X2 20 X3 Total employees 500 500 500 Employees left (Actual) (29) (58) (79) Employees expected to leave in the next year (31) (23) — Year end – No of employees 440 419 421 Shares per employee 100 100 100 Fair value of share at grant date 122 122 122 Vesting period 1/2 2/3 3/3 Expenses-20X1 (Note 1) 26,84,000 Expenses-20X2 (Note 2) 7,23,867 Expenses-20X3 (Note 3) 17,28,333 Note 1: Expense for 20X1 = Number of employees x Shares per employee x Fair value of share x Proportionate vesting period = 440 x 100 x 122 x 1/2 = 26,84,000 Note 2: Expense for 20X2 = (Number of employees x Shares per employee x Fair value of share x Proportionate vesting period) – Expense recognized in year 20X1 = (419 x 100 x 122 x 2/3) – 26,84,000 = 7,23,867 Note 3: Expense for 20X3 = (No of employees x Shares per employee x Fair value of share x Proportionate vesting period) – Expense recognized in year 20X1 and 20X2 = (421 x 100 x 122 x 3/3) – (26,84,000 + 7,23,867) = 17,28,333. Journal Entries 31 st December, 20X1 Employee benefits expenses (transfer to P/L) Dr. 26,84,000 To Share-based payment reserve (equity) 26,84,000 (Equity settled shared-based payment expected vesting amount) 31 st December, 20X2 Employee benefits expenses (transfer to P/L) Dr. 7,23,867 To Share-based payment reserve (equity) 7,23,867 (Equity settled shared based payment expected vesting amount) 31 st December, 20X3 Employee benefits expenses (transfer to P/L) Dr. 17,28,333 To Share-based payment reserve (equity) 17,28,333 (Equity settled shared-based payment expected vesting amount) Share-based payment reserve (equity) Dr. 51,36,200 To Share Capital / Securities Premium 51,36,200 (Share capital Issued)

Topics: Ind AS 102

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