Sunshine granted share options to its 600 employees on 1 October 2015. Eachemployee will receive 550 share options provided they continue to work for Sunshine for four years from the grant date. The fair value of each option at the grant date was K1.56.The actual and expected staff movement over the 4 years to 30 September 2019 is given below:2016 :22 employees left and another 50 were expected to leave over the next three years.2017 :A further 28 employees left and another 40 were expected to leave over the next 2 years.2018: A further 19 employees left and another 20 were expected to leave the followingyear. 2019: No actual figures are available to date.The sales director of Sunshine has stated in the board minutes that he disagrees with the treatment of the share options. No cash has been paid out to employees, therefore he failsto understand why an expense is being charged against profits.Requireda. Explain why share-based payments should be recognized in financial statementsb. Calculate the charge to the Profit and loss statement for the year ended 30September 2016- 2018 for Sunshine in respect of the share options and prepare the journal entry to record this
Sunshine granted share options to its 600 employees on 1 October 2015. Each
employee will receive 550 share options provided they continue to work for Sunshine
for four years from the grant date. The fair value of each option at the grant date was
K1.56.
The actual and expected staff movement over the 4 years to 30 September 2019 is given
below:
2016 :22 employees left and another 50 were expected to leave over the next three years.
2017 :A further 28 employees left and another 40 were expected to leave over the next 2
years.
2018: A further 19 employees left and another 20 were expected to leave the following
year. 2019: No actual figures are available to date.
The sales director of Sunshine has stated in the board minutes that he disagrees with the
treatment of the share options. No cash has been paid out to employees, therefore he fails
to understand why an expense is being charged against profits.
Required
a. Explain why share-based payments should be recognized in financial statements
b. Calculate the charge to the
September 2016- 2018 for Sunshine in respect of the share options and prepare the
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