Employee Compensation: Post-Employment and Share-Based

Correct Answer: The fair value of share-based compensation is determined at the grant date and recognized as an expense over the required service period.

The correct answer is that the fair value of share-based compensation is determined at the grant date and recognized as an expense over the required service period. Under US GAAP (ASC 718), share-based compensation should be measured at fair value on the grant date. The fair value is then recognized as an expense over the requisite service period, which is usually the vesting period, using the straight-line method unless another method better reflects the pattern of services received. The other options are incorrect because: - The intrinsic value method is not used under US GAAP for share-based compensation. Fair value is the required measurement method. - The expense is recognized over the service period, not only when the shares are exercised by the employee.

Correct Answer: The fair value of the share-based payment is determined at the grant date and is not subsequently adjusted, regardless of whether the market condition is satisfied.

The correct answer is that the fair value of the share-based payment is determined at the grant date and is not subsequently adjusted, regardless of whether the market condition is satisfied. Under IFRS 2, when a share-based payment has a market condition, the fair value is measured at the grant date, taking into account the probability of satisfying the market condition. This fair value is not subsequently adjusted, even if the market condition is not met. The other answers are incorrect because: - The fair value should not be subsequently adjusted based on the probability of satisfying the market condition. The probability is already factored in at the grant date. - The fair value is determined at the grant date, not the vesting date, and it does not take into account whether the market condition has been satisfied at the vesting date.

Correct Answer: Green Co. should recognize a total compensation expense of $15,000 for the share-based payment. Since the CFO left after two years of service, only 50% of the options vested. Therefore, the total compensation expense is $30 × 1,000 options × 50% = $15,000.

The correct answer is that Green Co. should recognize a total compensation expense of $15,000 for the share-based payment. According to IFRS 2, the fair value of the equity-settled share-based payment is determined at the grant date and recognized as an expense over the vesting period. In this case, the grant date fair value is $30 per option, and there are 1,000 options granted, so the total fair value is $30,000. However, since the CFO left after two years of service, only 50% of the options had vested at that point. Therefore, Green Co. should recognize only the portion of the expense that corresponds to the vested options. The calculation is as follows: Total fair value at grant date: $30 × 1,000 options = $30,000 Portion of options vested: 50% (2 out of 4 years) Compensation expense to be recognized: $30,000 × 50% = $15,000 The other answers are incorrect because they either recognize the full expense regardless of the CFO's departure or incorrectly calculate the vested portion of the options.