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Share Based Payments

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Published in: Accountancy
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The above topic is very important for those students who is doing the CA & ICWA. The notes attached assists the students to understand about the topic regards Share based payments such as ESOP,ESPP & SAR etc. Go through the notes you will understand the very crux about the topic.

Mahesh S / Chennai

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  1. ESOP It is a plan under which the Company grants stock options to its employees. The options are given t Basic Terms to be understand under ESOP Plan Grant Date:- It is the date on which the scheme has been announced. 01.0 .2006 Grant date Satify the vesting condition to get the benefit from Stock Option Plan. Vesting Conditions Ex:- Stay In Employment till 31.3.2010.+lnc.in PAT+lnc. in Mkt Price+lnc. In Sales or may be anyone of th Method followed Accounting Entries 1) Vesting period/Option to buy the shares given to th Exercise period (option continues till one year, from Vesting period. Intrinsic Basis MP>EP Vesting Period Entries Particulars Employee Compensation a/c Dr To ESOP o/s Note:- The above entry passed during vesting period to estimate the liability in future will be there "Durin Exercise I Exercised Cash/Bank a/c Dr ESOP o/s a/c Dr(Reversal) To E.S.C (F.V) To Securities Premium (b/f) Vesting date:-
  2. By this date, the Company comes to know how many employees are eligible for options. Vesting period:- During this period, the employee has to satisfy some condition. It can be the stay in the employmer Exercise period:- During this period, options are exercised. Exercise Date:- The last date in Exercise period. Note:- Those are options which are not exercised has to be forfeited. During V/p During Exercise Period V/P Ineligible Options Exercise Note:- Guidance note issued by ICAI, notified that the total cost of options is required to be spread 01.04.2004-15.12.2004 During V/p During Exercise Period Vesting period Entries Empl.Compensation a/c Dr To ESOP a/c Dr To Empl.Compensation a/c Qn no:-4 Santhosh Ltd Page no:-103 Basic Data Analysis Vesting period V/P Ineligible 400.000,oo 400.000,oo
  3. During V/p 3 yrs During Exercise Period 3 yrs Total Estd Life 6 yrs Estd ann.forfeiture for each year during vesting period 2008-2009 No:- of Options granted (Constant) No:- of Employees remains after estd forfeiture of 3% F.V (given) Product of above 3 items Expired period/Vesting Period Product *Expired Period/ Vesting period (-)Amount to be recognised Amt to be charged to P&L a/c Vesting period Entries for each year Emp.Compensation a.c Dr To ESOP o/s a/c Dr To Emp.Compensation a/c Exercise period Entries for each year Cash/Bank a/c Dr Emp.O/s a/c Dr To ESC To Sec.Premium(b/f) Cash/Bank a/c Dr Emp.O/s a/c Dr To ESC To Sec.Premium(b/f) Emp.O/s a/c Dr To Gen. Reserve Estimated forfeiture for next 3 yr: 2010 2011 5.705.ooo,oo 5.705.ooo,oo 25.000.ooo,oo 7.500.ooo,oo 12.500.ooo,oo 3.750.ooo,oo 3.000.ooo,oo V/P Ineligible 2008-2009 500,00 3% 2.282,oo (2005-2008) 15,00 17.115.ooo,oo 1/3 5.705.ooo,oo 5.705.ooo,oo 5.705.ooo,oo 5.705.ooo,oo (Proportionate re 5.000.ooo,oo 27.500.ooo,oo 2.500.ooo,oo 13.750.ooo,oo 3.000.ooo,oo
  4. Qn.no:-l Page no:-7.4 PM Grant date;- Options lapsed in each year 31.3.2013 31.3.2014 31.3.2015 Option Vested Decision Estd earnings Required 01.04.2009 Ex.Price 20 Chart presentatio Options offered 1000 V/P Ineligible 50 40 35 125 (125 lapsed-Due to condition unsatisfied (employees) (employees) (employees) Yr-I No option vested- at the end of yr- since earning condition is not satisfied. Yr-2 16% 14% Earnings Achieved as per vested condition Decision Exercise 850 13% 12,000/0 No option vested at the end of yr- since earning com is not satisfied. Statement showing amt to be charged to P&L a/c Particulars No:- of Employees No:- of Options Fair Value Product Exp.Period/Vesting Period Product*EP/VP (-)Recognised Amt to be charged to P&L a/c Vesting period Entries Particulars Emp.Comp.Expense a/c To ESOP o/s a/c a/c Dr Yr-I (1000-50) Actuals Yr-2 950 (950-40) Actuals 100 30 910 100 30 2.850.ooo,oo 0,33 950.000,oo o 950.000,oo 31.3.2013 950.000,oo 950.000,oo 2.730.ooo,oo 0,67 1.820.ooo,oo (950.000,00) 870.000,oo 950.000,oo
  5. To Emp.Comp.Expense Exercise period Particulars Exercise Entry Cash/Bank a.c Dr ESOP o/s a.c Dr To ESC To Sec.Premium (b/f) Forfeited entry ESOP o/s a.c Dr To Gen.Reserve Employee Stock Pur.PIans (ESPP) 31.3.2016 950.000,oo (Exercise the opti 1.700.ooo,oo 2.550.ooo,oo 850.000,oo 3.400.ooo,oo 75.000,oo 75.000,oo Under these plans, employees are given an option to subscribe the shares of employer at concessic The Ex.Price is set at a specific rate of discount on the issue price/mkt price on the date of exercise. The F.V of ESPP is recognised over the vesting period in the same way as ESOP. Qn.4 Page no:-7.11 PM Ans:- 30.04.2015 Bank a/c Dr Emp.Compensation a.c Dr To ESC To Sec.premium (b/f) Share Appn Rights Ex.Price 50,00 2.000.ooo,oo 240.000,oo F.V.Price 60,00 400.000,oo 1.840.ooo,oo These are the rights that entitle the employees to receive cash or shares for an amount equivalent Vesting Period 01.04.2010 40 (Price on Vesting date) Price on various dates Whatever price fluctuates in the vesting period, one can converts the appreciation from the exercis Emp.Compensation Expense a/c Dr To Provision for SAR-Non Current Liability a/c Dr To Emp.Compensation Expense Provision for SAR a/c Dr To Bank ESOP Qn.No:-7 Page tdno:-7.6 ABC Ltd xxx xxx xxx ESOptions xxx xxx xxx I.ooo,oo
  6. V/P ineligible 300 v/P Eligible (01.05.2013) Particulars No:- of employees No:- of options awarded to employee Intrinsic Val.per share Product Avg period Product Avg Less:-Already Recognised Charged to P&L a/c -First 2 years & 6 mths Excess figure transferred to "Gen.Reserve" SAR Computation Q.11.Page no:-106 Walwaker Price per share Vesting period Exercise period F.V per share No:- of employees No:- of shares Product EP/vp Product* Avg Period Less:- Recognised in each year P&L a/c Charged 2007-08 By Emp.Compensation Expense To bal c/d 2008-09 By bal b/d By Emp.Compensation Expense To bal c/d Exercised 500 (b/f) 31.3.12 31.3.11 Intrinsic value (1.4.2007-31.3.2010) (1.4.2010-30.6.2010) 2007-08 600 1000 1 120 1000 1 120 120.000,oo 1/2.5 48.000,oo o 48.000,oo 120.000,oo 0,80 96.000,oo (48.000,00) 48.000,oo Exercise Price 25 3yrs 3mths 2008-09 125 21,00 494,00 100,00 1.037.400,oo 1/3 345.800,oo 345.800,oo Provision for SAR a/c Cr 345.800,oo 345.800,oo 345.800,oo 390.200,oo 736.000,oo 23,00 480,00 100,00 1.104.ooo,oo 2/3 736.000,oo (345.800,00) 390.200,oo Dr 345.800,oo 345.800,oo 736.000,oo 736.000,oo
  7. 2009-10 By bal b/d By Emp.Compensation Expense To bal c/d 2010-11 By bal b/d By Emp.Compensation Expense-Addl Provision To bank (b/f) Liability Met Graded Vesting Qnno:-9 Page no:-106 Walwaker Ans:- No:- of employees covered Option granted for each employee Avg No:- of Options as per graded vesting Options Cancelled in each grade Fair value 2008-09 1st 2nd 3rd 2009-10 2nd 3rd 2010-11 3rd Emp.Compensation Expense a/c 736.000,oo 444.800,00 1.180.800,oo 1.180.800,oo 49.200,oo 1.230.ooo,oo 800 30 1.180.800,oo 1.180.800,oo 1.230.ooo,oo 1.230.ooo,oo Graded/Group Vesting 1st 6 24 No:-of Options(graded %) No:-of empl offered Dr 2nd 12 10 Fair Value 6 12 12 12 12 12 12,5 10 12,5 14 12,5 14 14 720 650 594 No:-of empl exer 700 638 590 Cr
  8. 2008-09 To ESOP a/c By a/c 2009-10 To ESOP a/c By a/c 2010-11 To ESOP a/c By a/c no:-7 Nov 2015 Price per share Vesting period Exercise period F.V per share No:- of employees No:- of shares Product EP/vp Product *Avg Period Less:- Recognised in each year P&L a/c Charged 2011-12 By Emp.Compensation Expense Intrinsic value 124.280,oo 124.280,oo 82.500,oo 82.500,oo 33.712,oo 33.712,oo 35,00 (01.04.2011-31.3.2014) (01.04.2014-30.06.2014) 31.3.2012 25,00 548,00 100,00 1.370.ooo,oo 1/3 456.666,67 456.666,67 Provision for SAR a/c Dr 124.280,oo 124.280,oo 82.500,oo 82.500,oo 33.712,oo 33.712,oo Exercise Price 130,00 31.3.2013 28,00 519,00 100,00 1.453.200,oo 2/3 968.800,oo 456.666,67 512.133,33 Cr 456.666,67
  9. To bal c/d 2012-13 By bal b/d By Emp.Compensation Expense To bal c/d 2013-14 By bal b/d By Emp.Compensation Expense To bal c/d 2010-11 By bal b/d By Emp.Compensation Expense To bank (b/f) Liability Met 456.666,67 456.666,67 968.800,oo 968.800,oo 1.760.ooo,oo 1.760.ooo,oo 1.925.ooo,oo 1.925.ooo,oo 456.666,67 456.666,67 512.133,33 968.800,oo 968.800,oo 791.200,oo 1.760.ooo,oo 1.760.ooo,oo 165.000,oo 1.925.ooo,oo
  10. Share Based Payments. o the employees at concessional price which is fixed and pre-determined. 31.3.2009 lese along with the stay back in employment. e employees the expire of Total life of scheme V(Option) Fair Value Basis Valn as per BSM. Cr xxx xxx Period" Forfeited ESOP o/s a/c Dr To Gen.Reserve(Accumulated amount) Employee rendered services and by not opting the "Shares Option" it will transform the services in
  11. It, increase in PAT, increase in Sales, increase in MP etc. v/P Eligible Not Exercise (amortised) equally over the vesting period. 16.04.2004-15.03.2005 Options 400.000,oo 400.000,oo Employees (10,000 Employees) v/P Eligible 10000 Exercise 9500 Exercise Period Entries Exercised Cash/Bank a/c Dr ESOP a/c Dr-Reversed To E.S.C (Face.Value) To Sec.Premium (b/f) 2500 (Actual figure)
  12. Vesting Period 2009-2010 500,00 1.823,oo (2006-2009) 15,00 13.672.500,oo 2/3 9.115.ooo,oo (5.705.ooo,00) 3.410.ooo,oo 2009-2010 3.410.ooo,oo 3.410.ooo,oo 600 (B/f) 2010-2011 2010-2011 Exercise 3% 500,00 1.900,OO (actuals) (2007-2010) 15,00 14.250.OOO,OO Total 1 14.250.ooo,oo (9.115.ooo,00) 5.135.ooo,oo 3.410.ooo,oo 3.410.ooo,oo v/P Eligible 1000 (2010) 500 (2011) Face Value Sec.Premium 14.250.ooo,oo 5.135.ooo,oo 5.135.ooo,oo 5.135.ooo,oo 5.135.ooo,oo 2cog. Of Option cost of whole period) (Bal.amt accumulated tferred to Gen.reserve)
  13. Mkt.Price Intrinsic Value (diff) No:- of Options Granted 30 (Exp Charged to P&L) No:- of emp.Coverd 50 Dn of those employees who eligible for Options (employees) (Actuals) 875 (employees) Not Exercised 25 (b/f) Yr-I Yr-3 v/P Eligible 10,330/0 100 (forfeited) Yr-2 14% Condition satisfied dition Yr-3 875 (910-35) Actuals 100 2.625.ooo,oo 1,00 2.625.ooo,oo (1.820.000,00) 805.000,oo 31.3.2014 870.000,oo 870.000,oo Act.Engs Rate for- each year 30 Total No:-of emp exercise EX.Price 2.625.ooo,oo 31.3.2015 870.000,oo 805.000,oo 805.000,oo 1000 850,00 20,00 805.000,oo
  14. 870.000,oo ons within a year) »nal rate in a public issue or otherwise. (RFVP-EP) Revised F.V Price Es Net Price 56,00 Face.Value 6,00 10,00 805.000,oo No:- of shares 100,00 to the excess of mkt price on exercise date over a stated price. 31.3.2013 50 (Price on Exercise date) e price into the cash/shares and if the price goes down, which happens to devaluation of the share (Liability set-off) Ex.Price Mkt price 40 Intrinsic value 160 120
  15. (30.6.2014) Not Exercised 30.06.09 100 (Vesting period 2.5 years) 700 (1000-300) 1 120 84.000,oo 1 84.000,oo (96.000,00) (12.000,00) Mkt price 150 (Missing) SAR Computation an no:-3 Nov 2013 Ans:-Page no:-ll SAR/ESOP Case-I SAR Claim by the Employees 2009-10 24,00 492,00 (525-15-10-8) 100,00 1.180.800,oo 1 1.180.800,oo (736.000,00) 444.800,00 Particulars Price per share No:- of Emp.Stock options SAR Particulars No:- of Emp.Stock options Step-2 Ex. price Yr-I 144 5.000,oo 5.000,oo 1.180.800,oo Exp. To be recognised in respect of Eq.Component F.V under Eq.Settlement Option (6000*60) (1.4.2010) F.V under Cash.Settlement Option (5000*72) Eq.Component Exp. To be recognised each year for Eq.Component Exp. To be recognised in respect of Liability.Component Particulars Em.SO Fv at the end of each year Product EP/vp 2010-2011 5000 76,32 381.600,oo 1/3
  16. Addl provsn to be made on 30.06.2010 49.200,oo d 12 Product*EP/VP Less:-Recognised Charged to P&L a/c Emp.Compensation Exp. a/c Particulars 2010-11 To PFL a/c By a/c 2011-12 To PFL a/c By a/c 2012-13 To PFL a/c By a/c Dr 127.200,oo 127.200,oo 127.200,oo 127.200,oo 152.633,33 152.633,33 202.866,67 202.866,67 No:-of empl (given) 14 Product(A*B*C) Avg Period 43.200,oo 97.200,oo 97.440,oo 97.500,oo 99.120,oo 99.792,oo Options cancelled/v No:-of Options(grad Fair Value 6 12 12 Cr 720 648 580 650 590 594 1 1/2 1/3 1 2/3 1 10 12 1/2 14 Product avg period 43.200,oo 48.600,oo 32.480,oo 97.500,oo 66.080,oo 99.792,oo Option value tferred to Ger 1.200,oo 1.800,oo 672,00 3.672,oo ESOP o/s a/c 20 12 4 Dr
  17. 2008-09 By Emp.Com a/c By Bank To Gen.Reserve TO ESC TO Sec.Premium To bal c/d (b/f) 2009-10 By bal b/d By Emp.Com a/c By Bank To Gen.Reserve TO ESC TO Sec.Premium To bal c/d (b/f) 2010-11 By bal b/d By Emp.Com a/c By Bank To Gen.Reserve TO ESC TO Sec.Premium To bal c/d (b/f) Mkt price 1.200,oo 420.000,oo 147.000,oo 81.080,oo 649.280,oo 1.800,oo 765.600,oo 287.100,oo 66.080,oo 1.120.580,oo 672,00 708.000,oo 276.120,oo 984.792,oo 124.280,oo 525.000,oo Add:-Value of the service re per share Consn received per share Less:- Nominal value per sh 649.280,OO Sec.Premium 81.080,oo 82.500,oo 957.000,oo 1.120.580,oo 66.080,oo 33.712,oo 885.000,oo 984.792,oo 165,OC (Missing) 31.3.2014 32,00 550,00 (600-25-15-10) 100,00 1.760.ooo,oo Total 1 1.760.ooo,oo 968.800,oo 791.200,oo 1.760.ooo,oo
  18. Addl provsn to be made on 30.06.2010 165.000,oo
  19. Granted to employees 31.3.2010 Yrs 3,00 (01.06.2006-31.3.2009) 1,00 4,00 300 Denied on last date OF If not opted, then opti As per Schedule 13, it has been shown under "Res.& F.V given. Ito capital profit to the company.
  20. Exercise period 10000 Not Exercise 500 380.000,oo 380.000,oo 95.000,oo 665.000,oo Options granted for each employee
  21. 1900 Not Exercise EP/MP Vesting Condition 50 (Both Remains Same) 15 Stay in Employment d (forfeited) Total cost of Options amortised over vesting period (3 yrs) 900 (b/f) 10,00 5
  22. Yr-3 7%
  23. No:- of empl.Offered 500,00 No:- of emp.accepted 400,00 and ignore the right given to purchase of shares or payment in cash to the company. (M.P-E.P)
  24. (1.4.2010) C.Fair Value 10 (1.4.2010) C.Fair Value 60 72 31.3.2011 C.Fair Value 76,32 31.3.2012 C.Fair Value 83,952 31.3.2012 C.Fair Value 96,5448 (Locked shares) (60+200/0) Yr-2 2011-2012 Yr-3 5.000,oo 360.000,oo 360.000,oo (Freely tradeab (Freely tradeable shares) 5.000,oo 2012-2013 5000 83,95 419.750,oo 2/3 5000 96,54 482.700,oo 1
  25. 279.833,33 (127.200,00) 152.633,33 482.700,oo (279.833,33) 202.866,67 Tfered to Prov.for Liability a/c Cr PFL a/c Particulars 2010-11 By ECE a/c 127.200,OO To bal c/d 127.200,oo 2011-12 By bal b/d By ECE a/c 152.633,33 To bal c/d 152.633,33 2012-13 By bal b/d By ECE a/c 202.866,67 To bal c/d 202.866,67 Dr 127.200,oo 127.200,oo 279.833,33 279.833,33 482.700,oo 482.700,00 Cr 127.200,oo 127.200,oo 127.200,oo 152.633,33 279.833,33 279.833,33 202.866,67 482.700,00 Case-I If employee opts for Cash settlement on 2013-14 Less:-Recognised PFL a/c Particulars By bal b/d To bank (Settled) Charged to P&L a 43.200,oo 48.600,oo 32.480,oo 124.280,oo 48.900,oo 33.600,oo 82.500,oo 33.712,oo 125 1500 Dr 482.700,oo 482.700,oo Cr 482.700,oo 482.700,oo o (48.600,00) (32.480,00) (66.080,00) ).Reserve Intrinsic value Case-2 If employee 01 PFL a/c Particulars By bal b/d To ESOP ESOP o/s a/c 2013-14 Particulars By PFL a/c By_ Bank (6000*144) To ESC To Sec.Prem(b/f)
  26. Wn.Sec.premium EP received per- share are Group-I Group-2 125 10 Group--3 135,00 100,00 35,00 125 12,5 137,50 100,00 37,50 125 14 139,00 100,00 39,00
  27. N/A
  28. 50 Accepted by employees 250
  29. ???
  30. 18.750.ooo,oo
  31. N/A
  32. N/A
  33. N/A
  34. pts for Eq. settlement on 2013-14 Dr 482.700,oo 482.700,oo Dr 60.ooo,oo 1.286.700,00 1.346.700,00 Cr 482.700,oo 482.700,oo Cr 482.700,oo 864.ooo,oo 1.346.700,oo

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