On 1 January 2018, Axion Bank Berhad (ABB) granted 2,000 share options to its 100 employees....

 

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On 1 January 2018, Axion Bank Berhad (ABB) granted 2,000 share options to its 100 employees. The share option would vest at the end of year 2020 on condition the employees remained in service till end of year 2020. The option could be exercised till end of year 2021. The exercise price was RM10 and on the grant date the share price was also RM10. ABB was unable to estimate reliably the fair value of the options granted. At the end of year 2018, five (5) employees left their employment and ABB estimated that a total of twenty (20) employees would leave by the end of year 2019. At the end of year 2019, another five (5) employees left and ABB estimated that another ten (10) would leave in year 2020. In year 2020, five (5) employees left the service. ABB's share price for year 2018 till 2021 and the number of options exercised (assume exercised at year end and at share price at the date of options being exercised) are given as follows: Share price at year end (RM) Number of employees who exercised the options at Year year end 2018 13 2019 14 2020 16 65 2021 15 The balance Required: a) Discuss TWO (2) merits of awarding share options scheme as a form of rewarding employees for their yearly performances. Prepare journal entries that ABB will raise in their accounts for the year 2018 until 2021. Show b) all your workings. c) Illustrate the above adjustment in ABB's Statement of Financial Positions as at 31 December 2019 and 2020. On 1 January 2018, Axion Bank Berhad (ABB) granted 2,000 share options to its 100 employees. The share option would vest at the end of year 2020 on condition the employees remained in service till end of year 2020. The option could be exercised till end of year 2021. The exercise price was RM10 and on the grant date the share price was also RM10. ABB was unable to estimate reliably the fair value of the options granted. At the end of year 2018, five (5) employees left their employment and ABB estimated that a total of twenty (20) employees would leave by the end of year 2019. At the end of year 2019, another five (5) employees left and ABB estimated that another ten (10) would leave in year 2020. In year 2020, five (5) employees left the service. ABB's share price for year 2018 till 2021 and the number of options exercised (assume exercised at year end and at share price at the date of options being exercised) are given as follows: Share price at year end (RM) Number of employees who exercised the options at Year year end 2018 13 2019 14 2020 16 65 2021 15 The balance Required: a) Discuss TWO (2) merits of awarding share options scheme as a form of rewarding employees for their yearly performances. Prepare journal entries that ABB will raise in their accounts for the year 2018 until 2021. Show b) all your workings. c) Illustrate the above adjustment in ABB's Statement of Financial Positions as at 31 December 2019 and 2020.

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WORKING NOTES Number of share options granted per employee 2000 share option100 employees 20 share o... View the full answer