1) ABC Ltd grants 20 share appreciation rights to each of its 500 employees on 1 January 20X1. The rights are due to vest on 31 December 20X4. Assume that 80% vested on 31 December 20X4. The employees exercise their share appreciation rights on the 31 December 20X5. The fair value of the share appreciation right is $2, $3, $6, and $4 on 1 January 20X1, 31 December 20X1, 31 December 20X4 and 31 December 20X5 respectively. The market price of the share is $3.50, $6.50, $8.50, and $7.50 on 1 January 20X1, 31 December 20X1, 31 December 20X4 and 31 December 20X5 respectively. What is the liability recorded in the financial statements for the year ended 31 December 20X4?
$48,000
$6,000
$40,000
$24,000
2) ABC Ltd grants share options to its staff. For the options to be exercisable, certain performance conditions need to be satisfied over the next three years. The employee has to remain working for the company during this period to become entitled to the award. The company should recognise an expense for this award:
at the grant date.
at the end of the three-year period.
at the end of the three-year period and only if the options are exercised.
over the three-year period.
3) The accounting for defined contribution pension plan is easier when compared to a defined benefit pension plan because:
for each year, the employer records staff expenses equal to the earnings of the plan assets.
for each year, the employer records staff expenses equal to the amount paid out to retirees.
for each year, the employer records staff expenses equal to the amount contributed annually.
for each year, the employer records staff expenses equal to the amount provided by the actuary.
4) The disclosure requirements of FRS 102 Share-based payment enable users to understand:
all of the listed options.
the effect of share-based payment transactions on the entity's profit or loss for the period and on its financial position.
how the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period was determined.
the nature and extent of share-based payment arrangements that existed during the period.
5) ABC Ltd grants 1,000 share options to each of its five vice-presidents on 1 July 20X0. The options will vest on 30 June 20X4. The options will allow the vice-presidents to purchase shares at $4 each after 30 June 20X4. $4 is also the current share price as at 1 July 20X0. The intrinsic value and the fair value of each option on 1 July 20X0 is $0 and $5 respectively, and it is anticipated that all of the share options will vest on 30 June 20X4. What is the accounting treatment for the financial year ending 30 June 20X1 under FRS 102 Share-based payment?
Debit Compensation expenses $0, Credit Share-based Payment Reserve $0
Debit Compensation expenses $5,000, Credit Share-based Payment Reserve $5,000
Debit Compensation expenses $25,000, Credit Share-based Payment Reserve $25,000
Debit Compensation expenses $6,250, Credit Share-based Payment Reserve $6,250
6) Not all shares and share options are traded in an active market. Which of the following option valuation techniques should not be used as a measure of fair value in the first instance?
Intrinsic value model
Binomial model
Black-scholes model
Monte Carlo model
7) Which of the following statements relating to share options is FALSE?
The grant date is the date on which the share options are awarded.
None of the listed options.
A share option is a right to buy shares in the future.
The vesting period is the benefit period over which share option compensation expense is spread.
8) For cash-settled share-based payment transactions, FRS 102 Share-based payment requires an entity to measure the goods or services acquired and:
convert the award to an equity-settled share-based transaction.
hold the cost in equity.
establish a liability and, until the liability is settled, remeasure the fair value of the liability at each reporting date, and at the date of settlement, with any changes in value recognised in profit or loss for the period.
establish a liability which remains unchanged.
9) ABC Ltd grants 50,000 share options to its employees on 31 December 20X1. Each option is an option to buy the shares at $35 per share on the condition that they remain employed until 31 December 20X3. The market prices of the shares were $46 on 31 December 20X2 and $51 on 31 December 20X3. The fair value of each option on 31 December 20X1 is $10. It is anticipated that all the options will vest on 31 December 20X3. How much should ABC Ltd recognise as compensation expenses for the year to 31 December 20X2.
$275,000
$1,150,000
$250,000
$550,000
10) ABC Ltd grants 100 share appreciation rights to each of its 1,000 employees on 1 January 20X1. The management feels that, as at 31 December 20X1, 90% will vest on 31 December 20X3. The fair value of the share appreciation right are $9.60 and $10 on 1 January 20X1 and 31 December 20X1 respectively. What is the liability recorded in the financial statements for the year ended 31 December 20X1?
$288,000
$320,000
$300,000
$333,333
11) Which of the following is not an example of an input method under FRS 115 Revenue from Contracts with Customers?
None of the listed options.
Measure progress using resources consumed.
Measure progress using costs incurred.
Measure progress using labour hours expended.
12) Which of the following is an example of an output method under FRS 115 Revenue from Contracts with Customers?
Measure progress using resources consumed.
None of the listed options.
Measure progress using costs incurred.
Measure progress using labour hours expended.
13) AAA Ltd ("AAA") is in the business of construction. It has incurred the following contract costs in the first year on a two-year building contract in return for $6 million to construct a bridge. The material costs was $2 million and the other contract costs related to the construction was $1 million. The estimated costs of completion is $2 million. The actual costs incurred in the second year is $2 million. The project was completed in the second year. Assume the firm uses the input method to measure percentage of completion, i.e. measure progress using costs incurred, and that the entity satisfies its obligation over time. What is the total profit or loss should AAA recognise in its second year under FRS 115 Revenue from Contract with Customers?
$1 million profit.
$0.6 million profit.
$0.4 million profit.
$3 million profit.
14) Which of the following statements is FALSE under FRS 115 Revenue from Contracts with Customers?
If a customer has the option to acquire an additional good or service at a price that would reflect the stand-alone selling price for that good or service, that option provides the customer with a material right given that the option can be exercised only by entering into a previous contract.
If a customer has the option to acquire an additional good or service at a price that would reflect the stand-alone selling price for that good or service, that option does not provide the customer with a material right even if the option can be exercised only by entering into a previous contract.
An entity allocates the transaction price to the customer's option to acquire an additional good or service on a relative stand-alone selling price basis.
If the entity grants a customer an option and the option provides a material right to the customer, the customer in effect pays the entity in advance for future goods or services and the entity recognises revenue when those future goods or services are transferred or when the option expires.
15) Which of the following statements is FALSE under FRS 115 Revenue from Contracts with Customers?
None of the listed options.
An entity will recognise revenue when (or as) the entity satisfies a performance obligation over time, if the entity's performance creates an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.
An entity will recognise revenue when (or as) the entity satisfies a performance obligation over time, if the entity's performance creates or enhances and asset that the customer controls as the asset is created or enhanced.
An entity will recognise revenue when (or as) the entity satisfies a performance obligation over time, if the customer simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs.
16) Which of the following is not considered a qualifying asset as defined under FRS 23 Borrowing Costs?
A toll bridge that takes three years to build.
An expensive private helicopter that can be purchased from a local vendor.
None of the listed options.
A power generation plant that takes two years to construct.
17) Which of the following statements is FALSE under FRS 115 Revenue from Contract with Customers?
A contract modification is a change in the scope or price (or both) of a contract that is approved by the parties to the contract.
A contract modification exists when the parties to a contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties to the contract.
None of the listed options.
A contract modification could be approved in writing, by oral agreement or implied by customary business practices.
18) When shall borrowing costs be capitalised as part of asset?
When they are not directly attributable to the acquisition of qualifying assets as defined under FRS 23 Borrowing Costs.
None of the listed options.
When they relate to the period after the qualifying assets as defined under FRS 23 Borrowing Costs are substantially ready for their intended use.
When they are directly attributable to the acquisition, construction or production of the qualifying assets as defined under FRS 23 Borrowing Costs.
19) AAA Café Ltd ("AAA") started operations on 2 January 20X1 and is in the business of providing organic bento lunch sets to its customers. To enhance customer loyalty, AAA launched a year-long promotion program in 20X1, which offered its customer one loyalty point for every $1 spent in the café. Every 100 loyalty points will entitle a customer to a free lunch worth $10. All accumulated loyalty points expire by the end of 20X2. In the first year of operations, AAA had sales revenue of $1 million. AAA estimated that 50% and 40% of the loyalty points issued in 20X1 were redeemed in 20X1 and 20X2 respectively. Assume that all estimates materialised. What is the journal entry to record the redemption of the customer option to buy additional goods in the year ending 31 December 20X2 (round your figures to the nearest number) under FRS 115 Revenue from Contract with Customers?
Dr Unearned Revenue $40,000 Cr Sales Revenue $40,000.
Dr Unearned Revenue $33,027 Cr Sales Revenue $33,027.
Dr Unearned Revenue $36,697 Cr Sales Revenue $36,697.
Dr Unearned Revenue $36,363 Cr Sales Revenue $36,363.
20) Which of the following is an example of an output method under FRS 115 Revenue from Contracts with Customers?
None of the listed options.
Measure progress using costs incurred.
Measure progress using number of floors built.
Measure progress using labour hours expended.