HW on Share-Based Payment - HOMEWORK ON SHARE-BASED PAYMENT...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
HOMEWORK ON SHARE-BASED PAYMENT Problem 1 On Jan. 2, 2014, Pandora Co. granted 50 shares each to 400 employees, conditional upon the employees’ remaining in the company’s employ during the vesting period. The shares will vest at the end of 2014 if the company’s earnings increased by more than 15%; or at the end of 2015 if the earnings increased by an average of 12% over the two-year period; or at the end of 2016 if the earnings increased by an average of 10% over the three-year period. The shares have a fair value of P25 on Jan. 2, 2014, which is equal to the share price on the grant date. At the end of 2014, earnings had increased by 13% and 20 employees have left and the company expects that earnings will continue to increase at a similar rate in 2015 and expects to vest in 2015. The company also expects, on the basis of weighted average of probability, that a further 20 employees will leave during 2015. At the end of 2015, earnings increased by only 9% and therefore shares do not vest at the end of 2015. Also, 15 employees left the company in 2015 and the company further expects that 10 employees will leave the company in 2016. The company expects that earnings will continue to increase at similar rate. At the end of 2016, earning increased by 9% and 5 employees have left the company in 2016. Determine Pandora’s remuneration expense recognized in 2014, 2015 and 2016. Problem 2 On Jan. 1, 2014, Aeolus Corp. grants share options to each of its 50 employees. The share option will vest on Dec. 31, 201 6, provided that the employees remain in the company’s employ and provided that volume of sales of a particular product increases by an average of between 5% and 10% per year, the employees will receive 100 share options. If the volume of sales increases between 10% and 15% each year, the employees will receive 200 share options. If the volume of sales increases by an average of 15% or more, each employee will receive 300 share options. On Jan. 1, 2014, Aeolus estimated that the share options have a fair value of P30 per option and expects that the volume of sales of the product will increase by an average of between 10% and 15%. The company expects that no employees are leaving within the next 5 years. At the end of 2014, sales increased by 12% and the company expect that this rate of increase will continue in the next two years. At the end of 2015, product sales had increased by 18% and the company expects that sales will increase by an average of 15% or more over the three-year period. At the end of 2016, sales had increased by an
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern