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Example 1

Goody Ltd offers employees an option to buy shares at Tk20 each in three years, contingent on their continued employment. The shares are expected to be worth Tk30 at exercise, and the fair value of each option is Tk10. The document requires calculating the annual expense to be recognized in the income statement over the option's life.

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3 views1 page

Example 1

Goody Ltd offers employees an option to buy shares at Tk20 each in three years, contingent on their continued employment. The shares are expected to be worth Tk30 at exercise, and the fair value of each option is Tk10. The document requires calculating the annual expense to be recognized in the income statement over the option's life.

Uploaded by

miradvance study
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Example 1

Goody Ltd grants an option to its employees to acquire 1,000 Tk1 shares in 3 years time
for Tk20 per share, provided that they are still employed by the company at that date.

At the date of exercise the shares have an expected market value of Tk30 per share. The
fair value per option is Tk10.

Requirement

Show how much would be expensed to the income statement for each year over the life
of the option.

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