The Following Information Relates to Questions

question 27

Multiple Choice

The following information relates to questions
Viola Ltd has granted each of its 10 senior executives a choice between receiving a cash payment equivalent to 1000 shares or receiving 1200 share. The grant is conditional on the completion of three years’ service with the company. If the share alternative is chosen, the shares must be held for two years after vesting date. At grant date the company’s share price is £25 per share. At the end of years 1, 2 and 3 the share price is £27, £28 and £30 respectively. The company does not expect to pay dividends in the next three years. After taking into account the effect of post-vesting transfer restrictions the company estimates the grant-date fair value of the share alternative is £24 per share.
-What is the liability component at the end of year 1?

• A) £83 333
• B) £90 000
• C) £100 000
• D) £108 000

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Definitions:

Threats

Expressions or actions indicating an intention to cause harm or force someone to do something against their will.

Reliance

The act of depending or counting on something or someone, often used in legal contexts to describe a situation where one party bases a decision on the assurances or promises of another.

Misrepresentation

The act of providing false or misleading information with the intent to deceive someone into entering into an agreement.

Duress

Unlawful pressure brought to bear on a person, causing the person to perform an act that he or she would not otherwise perform (or refrain from doing something that he or she would otherwise do).