Reference no: EM132864101

Problem - On January 1, 2016, Rose Corporation's ordinary share is selling for P55 per share. On this date, Rose creates a compensatory share option plan for its 70 key employees. The plan document states that each employee may purchase 500 shares of its P10 par ordinary share for P55 per share after working for the company for three years. On this date, based on the Black-Scholes option pricing model, Rose estimates that each hption has a value of P18. Historically, Rose has experienced an employee turnover rate of 5% per year and, on the grant date, it expects this rate to continue over the next three years. Because of lower turnover, at the end of 2017 Rose changes its estimated turnover rate to 4% for the entire service period. At the end of 2018, the share option vests for 62 employees. 011 January 13, 2019, ten executives exercise their options when the share is selling for P75 per share. Rose uses the fair value method to account for this plan.

Required -

1. Prepare the schedule of compensation computations for its compensatory share option for 2016-2018 [round all computation to the nearest peso).

2. If Rose uses the intrinsic value method instead of the fair value method to account for this plan, what would be its total compensation cost on the date of grant and how would it disclose its compensation expense for 2016?