Share-based payments and retirement benefits, Financial Management

Assignment Help:

Applicant should have been well versed in the calculation of actuarial losses and gains on pensions. It would have been significant to ensure each item affecting liabilities and assets of the plan were entered into the correct column. The second part of part (a) required the calculation of the net pension liability or asset. This tested candidates' understanding of how the pension plan is reflected in the company's statement of financial position and it was important that candidates stated whether the net position was liability or asset.

Part (b) tested share-based expense. Although candidates would have been able to calculate the correct expense and On this occasion it was equity-settled, they were also required to appreciate the impact on the SOFP and record the journal entry with the credit going to equity/other reserves.

(a) Pension plan

(i) Actuarial gains and losses

FV of plan assets

PV of plan liabilities

$000

$000

Opening balance

5,700

5,500

Service cost

1,020

Interest cost (6% x $5,500,000)

330

Expected return (3% x $5,700,000)

171

Benefits paid

(280)

(280)

Contributions

820

6,411

6,570

Actuarial loss on plan assets

(111)

Actuarial gain on plan liabilities

(70)

Closing balance

6,300

6,500





(ii) Statement of financial position $000

Present value of pension plan liabilities at 31/12/12 6,500

Fair value of pension plan assets at 31/12/12 (6,300)

Net pension liability 200

Share-based payments

(i) Charge for the year

Year ended 31 December 2011

Eligible employees (400-35-80) = 285

Equivalent cost of options = 285 employees x 1,000 rights x FV$8 = $2,280,000

Allocate over 3 year vesting period $2,280,000/3 = $760,000 equivalent charge to the income statement in 2011.

Year ended 31 December 2012

Eligible employees (400-35-28-34) = 303

Equivalent cost of options = 303 employees x 1,000 rights x FV$8 = $2,424,000

Cumulative amount to be recognised within equity = $2,424,000 x 2/3 years = $1,616,000

Less amount previously recognised = $1,616,000 - $760,000 = $856,000

(ii) Journal

Journal entry required:

DR: Staff costs $856,000

CR: Equity (other reserves) $856,000


Related Discussions:- Share-based payments and retirement benefits

Determine the value of most common cash flow pattern stock, Name two patter...

Name two patterns of cash flows for a share of common stock. How does the market determine the value of the most common cash flow pattern for common stock? Cash flows for a sha

Rectification of errors, What is rectification of errors? List and explain ...

What is rectification of errors? List and explain the stages where the errors are deducted for rectification.

Treasury yield curve, Treasury securities are government bonds issued...

Treasury securities are government bonds issued by the US Treasury Department. These are issued through the Bureau of the Public Debt. They are debt-financing ins

What is commercial papers, Q. What is Commercial Papers? Commercial Pap...

Q. What is Commercial Papers? Commercial Papers: Commercial papers (CPs) are short-term, unsecured securities issued by highly creditworthy large companies. They are issued wit

Organizational cost drivers, Organizational Cost Drivers It is the cost...

Organizational Cost Drivers It is the cost consequences that result from managerial choices concerning the company of activities as well as the involvement of persons inside an

Calculate total amount of dividends in arrears, QTL Tech has an issue of pr...

QTL Tech has an issue of preferred shares outstanding with a $50 stated value that pays a dividend of 7.5%. There are 325,000 shares outstanding. QTL has not paid preferred share d

State the concept of overtrading, State the concept of Overtrading Over...

State the concept of Overtrading Overtrading can result in insolvency which means companies have severe cash flow problems. This means that a thriving company, which may look v

Calculate the net present value, Tri-City Industries is considering two pos...

Tri-City Industries is considering two possible capital projects. Project A requires an initial investment of $240,000 and provides cash flows before tax of $120,000 in year one, $

What are classes of institutions that issue bonds in the usa, What are the ...

What are the main classes of institutions that issue bonds in the USA? There are three major classes of institutions which issue bonds in the USA: national governments, local g

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd