The following information appeared in the footnote disclosure to the 20x1 annual report of SG Company Ltd.

The company has introduced a share appreciation rights plan on 1 January 20x1, whereby 100,000 share appreciation rights (SARS) are given to ten of our managers. Under this plan, each manager is entitled to receive cash based on the increase in the company’s share price from 1 January 20x1 to 31 December 20x2 provided they remain in the company’s employment at 31 December 20x2.

On 1 January 20x1, the share price of SG Company Ltd was $5 per share. The share prices of SG Company subsequent to the grant were as follows:

Required
Discuss how SG Company Ltd should account for the share appreciation rights assuming that IFRS 2 had been adopted in 20x1 and 20x2. Ignore tax effects.

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31 December 20x1 31 December 20x2. $6.00 per share $7.50 per share SG Company estimated that the forfeiture rate would be nil. No manager left the company in 20x1 and 20x2. At the time of award of the grant. IFRS 2 had not been issued.