Reference no: EM132715829

QUESTION 1: Prior to the release of AASB 2, many reporting entities failed to recognise the share options being provided to senior executives. Why?

QUESTION 2: Cottesloe Ltd has granted its managing director 50 000 share options conditional upon him remaining with the company for a further five years. In addition, the share price must increase by 50 per cent before the end of year 5.

REQUIRED - How should Cottesloe Ltd account for the above vesting conditions?

QUESTION 3: In an article that appeared in Business Review Weekly on 4 March 2004 (entitled 'Share options trap'), it is stated that under AASB 2 'companies must value and record as an expense any options granted to employees in exchange for their services. Previously, Australian companies recorded share-based payments in the notes to financial statements, arguing that share-based payments did not cost the company anything'.

REQUIRED - Do you think that there is any logic to the argument that 'share-based payments did not cost the company anything'?

QUESTION 4: On 1 July 2023, Supplyco Ltd provides Grove Ltd with some inventory, which has a fair value of $200 000. In exchange for the inventory, Grove Ltd provides Supplyco Ltd with 20 000 shares in Grove Ltd.

REQUIRED - Provide the accounting entry to account for the above equity-settled share-based transaction.