C Ltd. prepares its financial statements to 31 March each year. The financial statements are approved for issue on 20 May. On 1 April 20X1, C Ltd.…

CA Final · Financial Reporting · RTP · November 2026
C Ltd. prepares its financial statements to 31 March each year. The financial statements are approved for issue on 20 May. On 1 April 20X1, C Ltd. granted 2,000 employees 1,000 share options each. The options are due to vest on 31 March 20X4 provided the relevant employees remain in employment over the three-year period ending on 31 March 20X4. On 1 April 20X1, the directors of C Ltd. estimated that 1,800 employees would qualify for the options on 31 March 20X4. This estimate was amended to 1,850 employees on 31 March 20X2, and further amended to 1,840 employees on 31 March 20X3. On 1 April 20X1, the fair value of an option was ₹ 1.20. The fair value increased to ₹ 1.30 by 31 March 20X2 but, due to challenging trading conditions, the fair value declined after 31 March 20X2. On 30 September 20X2, when the fair value of an option was 90 paise, the directors repriced the options and this caused the fair value to increase to ₹ 1.05. Trading conditions improved in the second half of the year and by 31 March 20X3 the fair value of an option was ₹ 1.25. Any additional costs that have occurred because of the repricing of the options on 30 September 20X2 should be spread over the remaining vesting period from 30 September 20X2 to 31 March 20X4. Required: Explain how the above event would be reported in the financial statements of C Ltd. for the year ended 31 March 20X3. Also provide necessary journal entries for the year ended 31 March 20X2 and 31 March 20X3.

Suggested Answer and Working Notes:

Ind AS 102 ‘Share-based Payments', requires that equity settled share-based payments should be measured based on their fair value at the grant date, based on the number of options expected to vest based on estimates at the reporting date. The cost should be spread over the vesting period - three years in this case. This means that the charge to profit or loss in the year ended 31 March 20X2 = 1,850 × 1,000 × ₹ 1.20 × 1/3 = ₹7,40,000 Journal Entry as on 31 March 20X2 Particulars Dr. ₹ Employee benefits expenses (transferred to P/L) Dr. 7,40,000 To Share-based payment reserve (equity) (1/3 of expected vested equity instruments value) 7,40,000 Based on the original arrangements, the cumulative balance in equity on 31 March 20X3 = ₹ 14,72,000 (1,840 × 1,000 × ₹ 1.20 × 2/3). The impact of the repricing on 30 September 20X2 is to charge the incremental increase in fair value over the remaining vesting period on the same basis as the original charge. Therefore, the additional credit to equity in respect of the repricing = 1,840 × 1,000 × {₹ 1.05 – ₹0.90} × 6/18 = ₹ 92,000 The closing balance in equity = ₹ 14,72,000 + ₹ 92,000 = ₹ 15,64,000. The charge to profit or loss in the year ended 31 March 20X3 = ₹ 15,64,000 – ₹ 7,40,000 = ₹ 8,24,000. Journal Entry as on 31 March 20X3 Particulars Dr. ₹ Employee benefits expenses (transferred to P/L) Dr. 8,24,000 To Share-based payment reserve (equity) (2/3 of expected vested equity instruments value) 8,24,000

Topics: Ind AS 102

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