Question 1 Laduan Co is the parent company of a group undergoing rapid expansion through acquisition. Laduan Co has acquired a subsidiary Jaya Co. The current financial year end is 30 June 20X8. Laduan Co acquired 60% of the 10 million equity shares of Jaya Co on 1 July 20X7. Two Laduan Co shares are to be issued for every five shares acquired in Jaya Co. These shares will be issued on 1 July 20X8. The fair value of a Laduan Co share was RM30 at 1 July 20X7. Jaya Co had previously granted a share-based payment to its employees with a three-year vesting period. At 1 July 20X7, the employees had completed their service period but had not yet exercised their options. The fair value of the options granted at 1 July 20X7 was RM15 million. As part of the acquisition, Laduan Co is obliged to replace the share-based payment scheme of Jaya Co with a scheme of its own which has the following details: Laduan Co issued 100 options to each of Jaya Co's 10,000 employees on 1 July 20X7. The shares are conditional on the employees completing a further two years of service. Additionally, the scheme required that the market price of Laduan Co's shares had to increase by 10% from its value of RM30 per share at the acquisition date over the vesting period. It was anticipated at 1 July 20X7 that 10% of staff would leave over the vesting period but this was revised to 4% by 30 June 20X8. The fair value of each option at the grant date was RM20. The share price of Laduan Co at 30 June 20X8 was RM32 and is anticipated to grow at a similar rate in the year ended 30 June 20X9. Required: (i) How the consideration for the acquisition of Jaya Co should be measured on 1 July 20x7. Your answer should include a calculation of the consideration and a discussion of why only some of the cost of the replacement share-based payment scheme should be included within the consideration. (4 marks) (ii) How much of an expense for the share-based payment scheme should be recognised in the consolidated profit or loss of Laduan Co for the year ended 30 June 20X8. Your answer should include a brief discussion of how the vesting conditions impact upon the calculations. (5 marks) Question 1 Laduan Co is the parent company of a group undergoing rapid expansion through acquisition. Laduan Co has acquired a subsidiary Jaya Co. The current financial year end is 30 June 20X8. Laduan Co acquired 60% of the 10 million equity shares of Jaya Co on 1 July 20X7. Two Laduan Co shares are to be issued for every five shares acquired in Jaya Co. These shares will be issued on 1 July 20X8. The fair value of a Laduan Co share was RM30 at 1 July 20X7. Jaya Co had previously granted a share-based payment to its employees with a three-year vesting period. At 1 July 20X7, the employees had completed their service period but had not yet exercised their options. The fair value of the options granted at 1 July 20X7 was RM15 million. As part of the acquisition, Laduan Co is obliged to replace the share-based payment scheme of Jaya Co with a scheme of its own which has the following details: Laduan Co issued 100 options to each of Jaya Co's 10,000 employees on 1 July 20X7. The shares are conditional on the employees completing a further two years of service. Additionally, the scheme required that the market price of Laduan Co's shares had to increase by 10% from its value of RM30 per share at the acquisition date over the vesting period. It was anticipated at 1 July 20X7 that 10% of staff would leave over the vesting period but this was revised to 4% by 30 June 20X8. The fair value of each option at the grant date was RM20. The share price of Laduan Co at 30 June 20X8 was RM32 and is anticipated to grow at a similar rate in the year ended 30 June 20X9. Required: (i) How the consideration for the acquisition of Jaya Co should be measured on 1 July 20x7. Your answer should include a calculation of the consideration and a discussion of why only some of the cost of the replacement share-based payment scheme should be included within the consideration. (4 marks) (ii) How much of an expense for the share-based payment scheme should be recognised in the consolidated profit or loss of Laduan Co for the year ended 30 June 20X8. Your answer should include a brief discussion of how the vesting conditions impact upon the calculations