Question Three

J & B Co Ltd$.$ granted $200$ options on its TZS$.1,000$ ordinary shares to each of its $800$ employees on $1^{st}$ January, $2019.$ Each grant is conditional upon the employee being employed by J & B Ltd$.$ Until $31{?}^{st}$ December, $2021.$

J & B estimated that:

i$.$ The fair value of each option was TZS$.4$

ii$.$ Approximately $50$ employees would leave during $2019,40$ during $2020$ and $30$ during $2021,$ forfeiting their rights to receive the options. The departures were expected to be evenly spread within each year.

The exercise price of the options was TZS$.1,500$ and the market value of the shares on $1^{st}$ January, $2019$ was TZS$.3,000.$

In the event only $40$ employees left during $2019($and the estimate of total departure was revised down to $95$ at $31$ December, $2019),20$ during $2020($and the estimate of total departure was revised down to $70$ at $31$ December, $2020)$ and $10$ left during $2021.$

Required:

The Directors of $J$&&$B$ Co Ltd$.$ Have asked you to illustrate how the scheme is accounted for under IFRS $2-$Share based payments.

$($a$)$ Show the double entries for the charge to profit or loss for employees' services over the three years$-$ and for the share issue, assuming al employees entitled to benefit from the scheme exercise their rights and ths shares were issued on ${31}^{st}$ December, $2021.$

$($b$)$ Explain how your solution would differ had $J$&& offered its employees, cas based on the share value rather than share options.