me
SD PAYMENT REPLACEMENT -
AWARDS ON ACQUISITION
Itis
*
possible thattheacquiring company may replace theshare
based in the
paymentscheme of employees acquired company.
↓
summple SBP Pre-acquisition
=>
rye.
·
cost c
of D e
↓
expenses.
- -
Buy-out.
$12 -
prom -
-
share-based scheme
-
-year acquisition. Etisitat (3yrs ->
Eyrs have
already
wants to replace existing passed)
share-based scheme its
from Goodwil
-
own shares. consideratio -
/100 + 10) 110.
↓ Less:FV
of NA of [Link]
So
technically, they buy existing 400will
>
equity
to
rights from employees
=> Services before acquisition date=> Pre-acquisition Fair value of
SBP is taken as
consideration
by Acquiring
Co
Services daleis Post- acquisition
after acquisition Normal
-
=>
treatment in Post
Pul/RE.
Y
3483
back I ↓ Sy 0
100% NCI
*We post bec
,
=
ABC
company has justacquired hares
a
e
of
Sub. Co.
for gloom,
--
-
cash. As 100% the shares acquired there will
paid in
-
of all were
be no non-controlling interests. Three
yearsago, sub. Lo had
granted
thatwere in
equity options to its
staff due to rest
give years
(i.e. further two
years). awards of it's
ABC
company has provided reement own
company
shares thatwill restin
further 2
years. Fair value
$51 million, whereas, the
of these
replacementawards was
awards postion.
fair value
of original was
- -
Required. How Rachel will account
for replacementawards.
the
FV
of replacementawards -
451m.
FU the SOPS $25m
of original 5y.
-
Pre combination value of option (of original awards)
before
->
Any fair
the date
of acquisition
[Link].
is treated as cost
of
acquiring
Cost
of Acquisition 25m
= x
3/5 $15m
=
-
=> services thathave
performed
-
been
already acq
Post-acquisition =
($51-$15m) 932m =
=> is the
fair
value
of
awards
replacement
↓
Treatmentunder
Afey
Normal
p36m y2
x =418m ->
recognised IFRs. 2.
in 4r.
Azur
is at 36m
=
x2/2 36m
=
Jess:Already
Recog:
FTY
18m
-
Luploid co -> Hammond Co.
Shares Consideration:10m shares x boy.
~Si shares-> shares acquired.
a shares 2.4m shares x$30
-hanen x =
=$72m
consideration
x to be
paid to acquire 60%
of Hammond lo
is $72m.
Preferred Approach (is briefly
and
3
=>
steps mention explain le
IFRS.
This
of
willcontext es.
suplain
=> Put
(i) conclude
SOFP.
=>
According
=>
to IERS-2, in case the
acquirer awards replacent
share based scheme
employees of targetto, itis similar
to
IFRS-2
to as
if buying further equity. Therefore, per fair as
of any pre-acquisition services provided for
value SBP is to
be considered 'cost business combination'
as
of
In thecase
of acquisition of Hammond Co, the
fair value
d
45m which should be made
already vested IS SBP is part
The difference
of costof business combination. fair value
of $3m (918-$15) shall be treated as a
post acquire
-
shall be
expense
and
recognized immediately since there is no
further
westing condition.
conditions
Vesting +
9SSBPs => Man X
-
- Service
gignored
condition market-based condition
es
3
x 100 options x 96%
ig
- While
and
because
Ikier
its
conditions
is
included in
impactis already
x $20 2
x
FU
of option &
grat
dale.
- 9,600,000.
Expense 9,600,000
9,600,000.
Equity
Option
cash
-
IFRS Settlement
-
2 shares
H
-
Two
possible scenarios
Entity
has a choice
Counterparty has a choice
Employee Notan
Employee
① Where
Company has the choice
are
ithas
Anentityshall treatthetransaction, assette if
an
is the shares;or
company
cannotissue
further
Ithas stated in
(ii) a
policy
or
pastpractice of settling cast.
Otherwise, itis considered as
equity-settled.
=>
② Instrument.
Where
counterparty has the
choice compound financial
I I
Formal
Liability Equity
or services(xxx
Fair value
of instrument
goods ↓
xix)ina
CS SBP ES SBP
of
cash alternative
Fatue
Less:
sampox, Smeaton
grants an
employee rightto choose eillier 20,000
e n
shares
-
OM Eee20x4 cash
or
for 18,000 shares
-
e
atthat
date. The
employee
must remain
employed on 30 June 20x4. mepricey o
[Link]*neg"
shares isto
1 July X 30Jx2 30J43 30 jx4
⑪ I
I I
FU
of shares 20,000 shares 4.90 98,000
=
x =
FU Cash 18,000 shares X 5 90,000 -I CS SBP
of =
-
->
>
SBP.
equity option
ES
8000->
Cash-settled SBP
Equity-settled SBP
3 jure x2 30 june x2 (5.35)
=$8000 1/3
x 2667
=
Emp2667 =
18,000 shares 5.35
x x
(/z 32,100
=
3.02667
Sup 32,100
liab is
30 June x3 30 June x3 (5.80)
8000
=
213
x 5333
-
U 18000
~
shares 5.80
x x
43 69,600
=
Less:A
Recognised:(1) Less:A. R 200)
-
FTY 2667
=
37,
Sup 37,500
Liab u
30 June x4 30 June xY (6.103
3/3 8000 =109,800
=
8800 y =
H
=18000 6.10
x
3/3
x
A. R 53)
-
Less:A.R -600
Fit FYY 40,200
2667 2