The fair value of share on December 2015 is 66, in other words the share value went up by 17. (66-49)
The executive will have an expense of 17 times 210000 which is equal to 3570000.
The vesting period is 2 years so we have to split the expense for two years 3570000/2 = 1785000
The compensation expense in 2015 is 1,785,000
In December 2016 share value went down by 5, (69-66)
The current year expense will be (61-49) x 210000 = 2,520,000
Opening provision is 1785000
So provision for the last year will be 2520000-1785000 = 735000
The compensation expense in 2016 is 735,000
(note that we will make 100% Provision for the last year)
JOURNAL ENTRIES
FOR 31 DECEMBER 2015
Compensation Expense 1,785,000
Obligation under SAR Plan 1,785,000
FOR DECEMBER 2016
Compensation Expense 735,000
Obligation under SAR Plan 735,000
FOR JANUARY 2017
Obligation under SAR Plan 2,520,000
Cash 2,520,000
____________________________________________________________________
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