SHARE BASED PAYMENTS ARE GOVERNED BY IND AS 102 AS PER IND AS 102 SHARE APPRECIATION RIGHTS PROVIDED TO THE

EMPLOYEES IS TO BE TREATED AS FOLLOWS

EMPLOYEE COMPENSATION EXPENSE(AT YEAR END)

GRANT DATE

(31-12-2017)
PARTICULARS (31-12-2018) (31-12-2019) (31-12-2020)

(A)NUMBER OF
EMPLOYEES(excluding
employees left or expected to
leave) 50-10=40 50-10=40 50-10=40 50-13 =37

   (B) Number of shares based on

average profit in bracket 10000(12.5%) 10000(10%) 10000(15%) 30000(25%)

(C) Fair value of shares 15 15 16.75 18.50

Compensation expense for the

year(A*B*C) 6000000 6000000 6700000 20535000

increase expense by(20535000-

(nil) 6700000)=13835000
Book expense in profit and loss increase employee
under head employee benefit (as there is no increase or decrese in compensation expense payoff liablity created for emplyee compensation
expense of - 6000000 expense) by (6700000- expense of enntire amount of 13835000
600000)=700000

ANSWER COMPENSATION EXPENSE FOR 2018-NIL

2019-700000
2020-13835000
LIABLITY OF (SHARE APPRECIATION RIGHT) SAR AT YEAR END 2020-20535000
WORKING NOTES
1)ACCOUNTING TREATMENT
SHARE APPRECIATION RIGHTS ARE THE RIGHTS BEING PROVIDED TO THE EMPLOYEES WHERE THEY CAN TAKE THE SHARES OF COMPANY WITH CERTAIN CONDITIONS BEING FULFILLED LIKE STAYING IN ORGANISATION ETC.
THE EMPLOYEE BENEFIT EXPENSE IS BOOKED IN PROFIT AND LOSS ON GRANT DATE AND IS TO BE REVISED FOR ANY INCREASE OR DECREASE ONLY TILL IT IS PAID OFF FINALLY.
IN THE GIVEN SUM THE COMPENSATION EXPENSE FOR EMPLOYEE IS CREATED ON 31-12-2017 I.E. GRANT DATE AND IS REVISED EACH YEAR TILL 3 YEARS VESTING PERIOD UNTIL IT IS PAID OFF FINALLY IN 2020
NUMBER OF EMPLOYEES EXPECTED TO LEAVE EACH YEAR IS DEDUCTED BEFORE CALCULATING EXPENSE,IN THE LAST YEAR THE EMPLOYEES ACTUALLY LEFT ARE TAKEN ONLY.
THE SAR ARE TAKEN BASED ON PROFITS FIGURES.

1. Dividends paid to the preference shareholders in 2018: As the preference shares are noncumulative and nonparticipating, the dividend will be paid to them
@12% only if there is profit in the current year and the preference dividend is declared. The fact that the preference shares are nonparticipating indicates
that the preference shareholders are entitled only to their dividend @ rate of 12% and will not get any additional amount from the dividend amount
remaining after payment of preference dividend.
Preference share capital: = P100 par, 100,000 shares issued and outstanding = 100,000 x 100 = P10,000,000

Rate of preference dividend = 12%

Dividends paid to the preference shareholders in 2018 = P10,000,000 x 12% = P1,200,000

2.Dividend per share on the ordinary shares in 2018:

Ordinary share capital = 500,000 shares issued and outstanding

Total dividend paid in 2018 - P2,500,000

Less dividend paid to the preference shareholders = P1,200,000

Dividend available for the common shareholders = 2,500,000 - 1,200,000 = 1,300,000

Therefore, dividend per share on the ordinary shares = 1,300,000 / 500,000 = P2.60

3. Dividends paid to the preference shareholders in 2019, if the preference shares are cumulative but nonparticipating: In case of cumulative preference
shares, the dividend is not paid in cash to the preference shareholders but is accumulated and paid at the time of maturity. The fact that preference shares
are nonparticipating indicates that the preference shareholders are entitled only to their dividend @ rate of 12% and will not get any additional amount from
the dividend amount remaining after payment of preference dividend.
Therefore, the preference dividend will be cumulated in 2019 = P10,000,000 x 12% = P1,200,000

4.  Dividend per share on the ordinary shares in 2019, if the preference shares are cumulative but nonparticipating
Ordinary share capital = 500,000 shares issued and outstanding

Total dividend paid in 2018 = P3,500,000

Less: dividend paid to the preference shareholders = P1,200,000

Dividend available for the common shareholders = 3,500,000 - 1,200,000 = 2,300,000

Therefore, dividend per share on the ordinary shares = 2,300,000 / 500,000 = P4.60

5. Dividends paid to the preference shareholders in 2018, if the preference shares are noncumulative but fully participating :
As the preference shares are noncumulative it means that only the dividend payable to them @12% will be paid if there is profit in the current year and
preference dividend is declared. The fact that preference shareholders are fully participating, indicates that the preference shareholders are entitled to their
dividend rate @12% and will also get an additional share in the dividend amount remaining after payment of preference dividend. the common
shareholders will also be first paid dividend also at the rate of 12%. The preference shareholders will get an additional amount from the dividend amount
remaining after payment of preference and common dividend at the rate of 12%. The additional amount be calculated in the ratio of the weight of
preference capital in the total capital structure of the company.

The total divdend payable to the preference shareholders is calculated as below :

Preference share capital: = P100 par, 100,000 shares issued and outstanding = 100,000 x 100 = P10,000,000

Common share capital: = P10 par, 500,000 shares issued and outstanding = 500,000 x 100 = P5,000,000
Total capital structure amount of the company = 10,000,000 + 5,000,000 = 15,000,000

Total dividend = P2,500,000

Dividends paid to the preference shareholders in 2018 = P10,000,000 x 12% = P1,200,000

Dividends paid to the common shareholders in 2018 = P5,000,000 x 12% = P600,000

Dividend amount remaining after payment of preference and common dividend @ 12% =

2,500,000 - 1,200,000 - 600,000 = 700,000

The additional dividend amount payable to the preference shareholders from the amount remaining after payment of preference and common dividend @
12% = 700,000 x (10,000,000 / 15,000,000) = P466,666.66 or P466,667

Therefore total dividend amount payable to the preference shareholders if the preference shares are noncumulative but fully participating is = P1,200,000 +
P466,667 = P1,666,667
employee compensation expenses to be recognised
2018 2019    2020
Total no. of employees 100 93 87

less :
no. of employees left 7 6 2

no. of employees expected to leave  19  3  -  

74 84 85

no. of options 200 300 300

fair value  P35  P35  P35

total expenses 518000 882000 892500

proportionate time period 1/2 2/3 3/3

   259000 588000 892500

-      (259000) (588000)

expenses to be recognised each year    259000    329000 304500

share capital to be recognised 185000 235000 217500

share premium to be recognised     74000 94000 87000

   (259000*10/35)  (329000*10/35) (304000*10/35)

total premium to be recognised at the end of expiration date

share benefit expenses a/c dr 655500 (300*69*35)   

To share premium     207000

To share capital a/c 517500  

the additional expenses which has created 237000 (892500-655500) shall be written off to p&l