Max Ltd. enters into a share-based payment arrangement with its employees on the following terms: Each employee will receive 500 shares if they…

Max Ltd. enters into a share-based payment arrangement with its employees on the following terms: Each employee will receive 500 shares if they remain employed for a period of five years.It is expected that no employees are expected to leave during the five year period.The grant date fair value of the award is 4,000.If an employee leaves Max Ltd. after the five -year period, but before its shares are listed, the entity has an option to purchase the shares for fair value from the employee.On grant date, Max Ltd. expects to list in the list in the next 3-5 years. This is the first share-based plan and Max Ltd. has no past practice or stated policy of buying back shares from employees when the employees leave. Neither does Max Ltd. expect that it will settle the awards in cash.At the end of year 2, Max Ltd. on longer expects to list; and the employees are informed of this fact. Max Ltd. announces to employees that if it is not listed after the five years and employees leave, Max Ltd. will repurchase the shares. The fair value of the shares is 6,000 on this date.At the end of year 3, the fair value of the liability has increased to 9,000 Required (ii) What would be the treatment of the awards, if at the end of year 2, Max Ltd. does not inform employees that it will repurchase the shares after a five-year period, and a listing of the entity's shares is still achievable. But at the end of year 6, Max Ltd. has not yet listed and two of the employees leave. Max Ltd. exercises its settlement choice and buys the leaving employee's shares at fair value.