Financial Accounting: Share-Based Compensation Share-Based Compensation Book Value Per Share
Financial Accounting: Share-Based Compensation Share-Based Compensation Book Value Per Share
Financial Accounting: Share-Based Compensation Share-Based Compensation Book Value Per Share
The earnings target of an average of 10% over three years is not achieved in 2019. The
average is only 9% (12% + 11% +4% equals 27% divided 3). Thus, the exercise price is P100
and the fair value of the share option is P25.
Illustration: Intrinsic value method
The intrinsic value is the excess of the market value of the share over
the option price.
2017 2018
Market value - December 31, 2017 150 Market value - December 31, 2018 180
Less: Option price 125 Less: Option price 125
Intrinsic value of each option 25 Intrinsic value of each option 55
Multiply by share options 10,000 Multiply by share options 10,000
Total compensation 250,000 Cumulative compensation-2018 550,000
Compensation expense for 2017: Compensation recognized-2017 125,000
(250,000/2) 125,000 Compensation expense-2018 425,000
2019 JOURNAL ENTRIES:
2017
Dec. 31 Salaries - share options 125,000
Market value - December 31, 2019 200 Share options outstanding 125,000
Market value - December 31, 2018 180 2018