The Following Information Relates to Questions
on 1 July 2013

question 11

Multiple Choice

The following information relates to questions
On 1 July 2013 Watson Pty Ltd granted 100 share appreciation rights (SARS) to each of its 50 employees, conditional on the employee not leaving the company in the next three years. The company estimates the fair value of the SARS at the end of each year in which a liability exists as shown in the table below. The intrinsic values of the SARS at the date of exercise at 30 June 2016, 2017 and 2018 are also shown. All SARS held by employees at 30 June 2016 vest.
$\begin{array}{|l|l|l|}\hline \text { Year ended } & \text { Fair value } & \text { Intrinsic value } \\\hline 30 \text { June } 2014 & \$ 14.40 &\\\hline \text { 30 June } 2015 & \$ 15.50 & \\\hline \text { 30 June } 2016 & \$ 18.20 & \$ 15.00 \\\hline 30 \text { June } 2017 & \$ 21.40 & \$ 20.00 \\\hline 30 \text { June } 2018 & & \$ 25.00 \\\hline\end{array}$
By 30 June 2016 nine employees have left and 15 employees have exercised their SARS.
-This is an example of:

• A) an equity-settled share-based payment transaction
• B) a cash-settled share-based payment transaction
• C) a share-based payment transaction where the counterparty has the settlement choice
• D) a share-based payment transaction where the entity has the settlement choice The following information relates to questions 14 to 16
• 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.

---

Definitions:

Pilot Change

An initial, small-scale implementation of a change or a new project intended to test its feasibility and effectiveness before wider application.

Blue-Collar Workers

Workers who perform manual labor, typically requiring physical work and often in industrial or manufacturing settings.

Innovations

The introduction of new ideas, methods, or products designed to improve effectiveness, efficiency, or competitive advantage.

Knowing-Doing Gap

The discrepancy between what individuals know they should do and what they actually do in practice.