Treetop Ltd grants 500 share appreciation rights (SARs) to 10 senior managers, to be taken in cash within 2 years of vesting date on condition that the managers do not leave in the next 3 years. The SARs vest at the end of year 3. Treetop Ltd estimates the fair value of the SARs at the end of each year in which a liability exists as shown below. The intrinsic value of the SARs at the date of exercise at the end of year 3 is also shown.

During year 1, one employee leaves and Treetop Ltd estimates that a further two will leave before the end of year 3. One employee leaves during year 2 and the corporation estimates that another employee will depart during year 3. One employee leaves during year 3. At the end of year 3, four employees exercise their SARs.

Required 

Prepare a schedule setting out the expense and liability that Treetop Ltd must recognise at the end of each of the first 3 years.

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Year Fair value Intrinsic value 1 2 3 $ 4.40 $ 6.00 $10.20 $9.00 Number of managers who exercised their SARS 4