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SBR Employee benefits and share-based payment

8 ACCA Strategic Professional questions with answers and explanations.

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All questions with answers
  1. In a defined benefit plan, remeasurements of the net defined benefit liability are recognised in:

    • 1 Profit or loss
    • 2 Cost of sales
    • 3 Equity directly as a transfer
    • 4 Other comprehensive income
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    Correct answer: Other comprehensive income

    Remeasurements, such as actuarial gains and losses, are in OCI and are not reclassified to profit.

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  2. The net interest cost on a defined benefit liability of $500,000 with a discount rate of 5 percent is:

    • 1 $5,000
    • 2 $50,000
    • 3 $25,000
    • 4 $250,000
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    Correct answer: $25,000

    Net interest is the net liability multiplied by the discount rate: 500,000 x 5% = 25,000.

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  3. Past service cost is recognised:

    • 1 In OCI
    • 2 Over the remaining service of employees
    • 3 In profit or loss at the earlier of the plan amendment and related restructuring costs
    • 4 In equity
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    Correct answer: In profit or loss at the earlier of the plan amendment and related restructuring costs

    Under current IAS 19, past service cost is recognised immediately.

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  4. In a defined contribution plan, the employer's expense for the period is:

    • 1 The net interest cost
    • 2 The contributions payable for that period
    • 3 The actuarial estimate of future benefits
    • 4 The change in the fair value of plan assets
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    Correct answer: The contributions payable for that period

    The employer's obligation is limited to the contributions it has agreed to pay.

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  5. 100 employees each receive 1,000 share options with a grant date fair value of $3. Vesting is after three years and 90 employees are expected to remain. The year 1 expense under IFRS 2 is:

    • 1 $90,000
    • 2 $300,000
    • 3 $270,000
    • 4 $100,000
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    Correct answer: $90,000

    90 x 1,000 x $3 x 1/3 = $90,000, with a credit to equity.

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  6. For an equity-settled share-based payment to employees, the fair value used is measured at:

    • 1 Each reporting date
    • 2 The exercise date
    • 3 The vesting date only
    • 4 The grant date and not remeasured
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    Correct answer: The grant date and not remeasured

    Equity-settled schemes use grant date fair value. Cash-settled schemes are remeasured to each reporting date.

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  7. A cash-settled share-based payment liability is remeasured:

    • 1 Only when the options vest
    • 2 In OCI
    • 3 At each reporting date until settlement, with changes in profit or loss
    • 4 At grant date only
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    Correct answer: At each reporting date until settlement, with changes in profit or loss

    The liability is at fair value, and changes go to profit or loss.

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  8. An entity offers termination benefits. When is the liability recognised?

    • 1 At the year end only
    • 2 When employees leave
    • 3 When it can no longer withdraw the offer or when it recognises related restructuring costs, whichever is earlier
    • 4 When the offer is accepted by all
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    Correct answer: When it can no longer withdraw the offer or when it recognises related restructuring costs, whichever is earlier

    IAS 19 sets this timing rule for termination benefits.

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