(a)Doremoon Bhd issued 2,000 share options to its sales managers with the condition that the revenues of the company reach RM500 million and its share price rises to RM20. The sales managers will have to be employed with Doremoon Bhd at the time the share options vest in order to receive the options. The share options had a fair value of RM12 on the grant date and will expire in 6 years.

Required:

How should the expense be recorded under each of the following different scenarios? Give reasons for your answers.

i.Revenues have reached RM500 million and the share price is RM18, all employees are still employed.

ii.The share price has reached RM20 and the revenue is RM495 million, all employees are still employed.

iii.Revenues have reached RM500 million and the share price is RM21, 30% of the employees left the company before the vesting date.

(b)At the beginning of 2017, Ultramon Bhd grants 1,000 shares to 500 employees, conditional upon the employees being employed by Ultramoon until 31 December 2019. The shares will vest at the end of 2017 if the entity's earnings increase by more than 20%; at the end of 2018 if the entity's earnings increase by more than an average of 15% per year over the two-year period; and at the end of 2019 if the entity's earnings increase by more than an average of 12% per year over the three- year period. The shares have a fair value of RM10 per share at the beginning of 2017, which equals the share price on the grant date.

By the end of 2017, the entity's earnings have increased by 16% and 30 employees have left. The entity expects that earnings will continue to increase at a similar rate in 2018, and therefore expects the shares will vest at the end of 2018. The entity expects that a further 20 employees will leave during 2018.

By the end of year 2018, the entity's earnings have increased by only 13% and therefore the shares do not vest at the end of year 2018. A total of 24 employees have left during the year. The entity expects that a further 20 employees will leave during 2019, and that the earnings will increase by more than 10%, thereby achieving the average of 12% per year.

By the end of year 2019, 25 employees have left and the entity's earnings has increased by 10%, resulting in an average increase of 13% per year.

Required:

i.Show the amounts which would appear in the financial statements for year 2017, 2018 and 2019.

ii.Explain how your solution would differ had Doremoon offered its employees share appreciation rights (SARs) instead of share options (explain the accounts to be used and the types of adjustment to be made, computation of the amount is not required).