DE LA SALLE UNIVERSITY MANILA

RVR – COB DEPARTMENT OF ACCOUNTANCY

REVDEVT 2nd Term AY 15-16

Theory of Accounts
TOA Quizzer 7 Prof. Francis H.Villamin

IFRS 2 – SHARE-BASED PAYMENT

1. These are transactions in which the entity receives goods or services as consideration for equity
instruments of the entity, including shares and share options.
a. Equity settled share-based payment transactions
b. Cash settled share-based payment transactions
c. Equity payment transactions
d. Cash payment transactions

2. These are transactions in which the entity acquires goods or services by incurring liabilities to the
supplier of those goods or services for amounts that are based on the price of the entity’s shares and
other equity instruments.
a. Equity transactions
b. Cash settled share-based payment transactions
c. Purchase transactions
d. Cash payment transactions

3. It is an arrangement that provides for an automatic grant of additional share options whenever the option
holder exercises previously granted options using the entity’s shares, rather than cash, to satisfy the
exercise price
a. Reload feature
b. Reload option
c. Share option
d. Equity option

4. It is a new share option granted when a share is used to satisfy the exercise price of a previous share
option.
a. Reload option
b. Share option
c. Share warrants
d. Call option

5. Entity X has entered into a contract with entity Y. Y will supply X with a range of services. The payment
for those services will be in cash and based upon the price of the X’s ordinary shares on completion of
the contract. In accordance with IFRS 2, what type of share-based payment transaction does this
represent?
a. Asset settled share-based payment transactions
b. Liability settled share-based payment transactions
c. Cash settled share-based payment transactions
d. Equity settled share-based payment transactions

6. Equity settled share based transactions are those transactions in which the entity receives goods or
services
a. as a consideration for equity instruments of the entity including share options.
b. by incurring liability to a transfer cash or other assets to the supplier of the goods or services for
amounts that are based on the price of the entity’s shares or other equity instruments.
c. and the terms of the arrangement provide either the entity or supplier of goods or services with a
choice of whether the entity settles the transaction in cash or by issuing equity instruments.
d. without consideration.
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7. For equity settled share based payment transactions, the entity shall measure the goods or services
received and the corresponding increase in equity
I. Directly at fair value of the goods or service received.
II. Indirectly, by reference to the fair value of the equity instruments granted, if the fair value of the
goods or services received cannot be estimated reliably.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

8. For cash settled share-based transactions, an entity shall measure the goods or services received and
the liability incurred at the
a. fair value of the goods and services received.
b. fair value of the liability.
c. either the fair value of the goods or services received or the fair value of the liability.
d. neither the fair value of the goods or services received, nor the fair value of the liability.

9. For cash settled share-based payment transactions, until the liability is settled, the entity is required to
remeasure the fair value of the liability of each reporting date and the date of settlement and any
changes in fair value are
a. Recognized in profit or loss for the period
b. Included in retained earnings
c. Treated as component of equity
d. Not recognized

10. If the share-based payment transactions provide a choice whether the entity settles in cash or issues
equity instruments, the entity is required to account for the transaction as
I. Cash settled share-based payment transaction if and to the extent that the entity has incurred a
liability to settle in cash or other assets.
II. Equity settled share-based payment transaction if and to the extent that no liability has been incurred
by the entity.
a. I only
b. II only
c. Either I or II
d. Neither I nor II

11. It is the date on which the entity and another party agree to a share-based payment arrangement, being
when the entity and the counter party have shared understanding of the terms and conditions of the
arrangement.
a. Grant date
b. Measurement date
c. Exercise date
d. Balance sheet date

12. Measurement date is the date on which the fair value of the equity instrument granted is measured.
What is the measurement date for share-based payment transactions?
I. For transactions with employees and others providing similar services, the measurement date is the
grant date.
II. For transactions other than employees, the measurement date is the date the entity obtains the
goods or the counter party renders service.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

13. For purposes of share-based payment transactions, a reload feature is

a. An arrangement that provides for an automatic grant of additional share options whenever the option
holder exercises previously granted options using the entity’s shares, rather than cash, to satisfy the
exercise price.
b. A new share option is granted when a share is used to satisfy the exercise price of a previous share
option.
c. A contract that gives the holder the right but not the obligation to subscribe to the entity’s shares at a
fixed or determinable price for a specified period of time.
d. A contract that evidences a residual interest in the assets of an entity after deducting all its liabilities.
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14. When share options are granted, in what circumstances is compensation expense immediately
recognized?
a. In all circumstances.
b. In circumstances when options are exercisable within 2 years for services rendered the next two
years.
c. In circumstances when options are granted for prior service and the options are immediately
exercisable.
d. In no circumstance.

15. The exercise price and market price of stocks under a fixed compensatory stock option plan are equal on
the grant date. The fair value of the options is greater than the option price. Under the fair value method
a. Compensation expense will be recognized in connection with the option plan.
b. No compensation expense will be recognized in connection with the option plan.
c. Deferred compensation will be recognized.
d. No paid-in capital from stock options will be recognized.

16. Many shares and most share options are not traded in the active market. Therefore, it is often difficult to
arrive at a fair value of the equity instrument being issued. Which of the following option valuation
techniques should not be used as a measure of fair value in the first instance?
a. Black-Sholes model
b. Binomial model
c. Monte-Carlo model
d. Intrinsic value

17. It is the difference between the fair value of the shares to which the counter party has the right to
subscribe and the price the counter party is required to pay for those shares.
a. Intrinsic value
b. Fair value
c. Market value
d. Book value

18. It is the date on which the entity and another party agree to a share-based payment arrangement, being
when the entity and the counter party have shared an understanding of the terms and conditions of the
arrangement.
a. Grant date
b. Measurement date
c. Exercise date
d. Balance sheet date

19. What is the date on which the fair value of the equity instrument granted is measured?
a. Measurement date
b. Grant date
c. Exercise date
d. Balance sheet date

20. Current financial accounting standards require

a. the use of the fair value method but not the intrinsic value method.
b. the use of the fair value method and the intrinsic value method to account for each plan.
c. disclosure in the notes to the financial statements of compensation expense under the fair value
method if the intrinsic value method is used.
d. disclosure in the notes to the financial statements.

21. Under a cash settled share-based payment transaction, when shall an entity measure the fair value of
the liability arising from this arrangement?
a. At the end of the each reporting period only
b. At the beginning of each reporting period only
c. At the date of settlement only
d. At the end of each reporting period and at the date of settlement

22. If a share-based payment transaction provides that the employees have the right to choose the
settlement whether in cash or in shares, the entity is deemed to have issued
a. A compound financial instrument
b. An equity instrument
c. A liability instrument
d. Either an equity instrument of a liability instrument but not both
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23. Which of the following cases provides the correct measurement when the entity offers a share-based
payment transaction in which the terms of the arrangement provide the counter party with a choice of
settlement?
a. The entity shall measure the liability component of the compound financial instrument as the
difference between the fair value of the goods or services received and the fair value of the debt
component, at the date when the goods or services are received.
b. The entity shall measure the equity component of the compound financial instrument as the
difference between the fair value of the goods or services received and the fair value of the debt
component, at the date when the goods or services are received.
c. The entity shall not measure the equity component of the compound financial instrument and
measure only the liability component.
d. The entity shall measure the liability component of the compound financial instrument as the total of
the fair value of the goods or services received and the fair value of the debt component.

24. At the date of settlement for share-based payment transaction in which the terms of the arrangement
provide the counter party with a choice of settlement, (choose the incorrect one)
a. The entity shall not remeasure the liability to its fair value.
b. If the entity issues equity instruments on settlement rather than paying cash, the liability shall be
transferred directly to equity.
c. If the entity pays in cash on settlement rather than issuing equity instruments, that payment shall be
applied to settle the liability in full.
d. Any equity component previously recognized shall remain within equity.

25. All of the following shall be disclosed with respect to share-based payment transactions, except
a. a description of each type of share-based payment arrangement that existed at any time during the
period.
b. the number and weighted average exercise prices of share options.
c. the intrinsic values of the share options outstanding at the end of the period.
d. for share options outstanding at the end of the period, the range of exercise prices and weighted
average remaining contractual life.

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