- 7 Marks
CR – Nov 2021 – L3 – Q2a – IFRS 2: Share-based Payments | IFRS 13: Fair Value Measurement
Advise Mariam Plc on the correct accounting treatment for share appreciation rights (SARs) in compliance with IFRS 2 and IFRS 13.
Question
On 1 April 2018, Mariam Plc granted 500 share appreciation rights (SARs) to its 300 employees. All of the rights vested on 31 March 2020 and can be exercised from 1 April 2020 up to 31 March 2022. At the grant date, the value of each SAR was GH¢10, and it was estimated that 5% of the employees would leave during the vesting period. The fair value of the SARs is as follows:
| Date | Fair Value of SAR (GH¢) |
|---|---|
| 31 March 2019 | 9 |
| 31 March 2020 | 11 |
| 31 March 2021 | 12 |
All the employees who were expected to leave the employment did leave the company as expected before 31 March 2020. On 31 March 2021, 60 employees exercised their options when the intrinsic value of the right was GH¢10.50 and were paid in cash. Mariam Plc is, however, confused as to whether to account for the SARs under IFRS 2: Share-based Payment or IFRS 13: Fair Value Measurement and would like to be advised as to how the SARs should have been accounted for from the grant date to 31 March 2021.
Required:
Advise Mariam Plc on how the above transactions should be accounted for in its financial statements with reference to relevant International Financial Reporting Standards (IFRS).
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