Module 5

Question 1

IFRS 2 is the accounting standard that deals with what?

Answer 1

Share-based payments

Question 2

In what 2 statements are the effects of share-based payments reflected?

Answer 2

1- statement of comprehensive income
2- statement of financial position

Question 3

What are the 6 steps for accounting for share-based payments?

Answer 3

1. Determine whether the Award is a Share-based payment.
2. Determine whether the Share-based payment is an equity-settled or cash-settled share-based payment.
3. Determine the “fair value” on the Grant Date.
4. Determine the expense to reflect in the Statement of Comprehensive Income.
5. If the Award is cash-settled, update the valuation at the end of each period until it is settled (“mark to market update”.)
6. When the Award is settled determine the effects on appropriate elements within the Statement of Financial Position.

Question 4

what valuation method should you use for performance shares?

Answer 4

Monte Carlo

Question 5

what is the simplest valuation method for options or SARs?

Answer 5

black-scholes

Question 6

what valuation method should you use for shares with dividends?

Answer 6

just use the share price

Question 7

what valuation method should you use for shares without dividends?

Answer 7

use share price and formula to exclude value of dividends