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On January 1, 2020 Delta Co. issued 200 share options to each of its 100 executive officers. The options vest at the end of a 4-year period. On the date of the grant, each share option had a fair value of P24. Delta expects that all the options granted shall become exercisable. Four options together with P110 per share shall entitle to holder to acquire an ordinary share (P100 par value). Options shall expire by the end of 2024. Requirements: 1. The salaries expense for 2020 assuming that no change in estimate occurs by the end of the year: 2. The salaries expense in 2021 assuming that 5 employees left 2021 and that an additional 5 more are expected to leave by the end of the vesting period: 3. The salaries expenses in 2022 assuming that 3 more employees actually left in 2022 and an additional 3 more will leave by the end of the vesting period: 4. The salaries expense in 2023 assuming that only 1 additional employee left in 2023: 5. The credit to the share premium account as a result of the the exercise of 80% of the options in 2024:The company applies a binomial options pricing model, which takes into account the possibility that the share price will equal/exceed P75 in 3 years (hence the share options become excercisable) and the possibility that the share price will not equal/exceed P75 in 3 years (hence the option will be forfeited, that is reverted back to equity). The company estimates that the market value of the stock option on the date of grant with this market condition is P30 per option. The following information are deemed relevant: Date Estimated total number of Actual Share employees who will leave the Price at the end company by the end of 2022 of each year Dec. 31, 2020 20 60 Dec. 31, 2021 30 68 Dec. 31, 2022 25* 76 *Total actual number of employees who left the company. Requirements: 1. What is the compensation expense to be recognized in 2020? 2. What is the compensation expense to be recognized in 2021? 3. What is the compensation expense to be recognized in 2022? 4. Assuming that the actual share price amounted to P70 at end of 2022, what is the compensation expense to be recognized in 2022? 5. Assuming that the actual share price amounted to P75 at the end of 2021, what is the compensation expense in 2021?On January 1, 2020, Echo Corporation issued 50 share options to 250 employees that will vest once its share price equals P75. The employee is required to be employed with the company at the time the condition is met in order to receive the options. Two options together with P60 per share entitles the holder to acquire 1 ordinary share (P50 par value). The share options will expire in 5 years. On the date of grant, it is expected that the condition will be satisfied in 3 years (estimated vesting period)
