ACCOUNTING FOR SHARE CAPITAL TRANSACTIONS

Pro-forma of Stockholders Equity

Share Capital
Preference Shares – par, shares authorized,
shares issued and outstanding xxx
Ordinary Shares – par, shares authorized,
shares issued and outstanding xxx
Share Premium xxx
Total Share Capital xxx
Retained Earnings xxx
Treasury Shares, at Cost (xxx)
Total Shareholders’ Equity xxx

Share Capital (Capital Stock)

- Maximum amount fixed by the corporate charter or Articles of Incorporation (AOI) to be subscribed and
paid-in by the shareholders, either in money or property, labor or services at the organization of the
corporation
- Usually divided into shares (via share certificate)

Rights of a Shareholder
1. Share of the profits of the entity
2. To vote during elections
3. Pre-emptive right
4. To share in the net assets of the corporation in case of liquidation

Legal Capital
- Portion of the contributed capital or the minimum amount of paid-in capital, which must remain in the
corporation for the protection of corporate creditors
- Protected by the trust fund doctrine
 Par Value Shares: aggregate par value of all issued and subscribed
 No-Par Value Shares: total consideration received by the corporation including the excess of
issued price and stated value

Share Premium
- Portion of the paid-in capital representing the amounts paid by the shareholders in excess of the par

Basic Types of Shares

1. Ordinary Shares
- Ordinary shareholders have the same rights and privileges and have no preference over one
another
2. Preferred Shares
 - Entitles the owner preference in the distribution of dividends/assets of the corporation in the
event of liquidation

Authorized Share Capital

- Maximum number of shares that ordinary and preference share may be issued as allowed by the
government
- Computed by [ authorized shares x par value ]

Issued Share Capital

- Shares which have been sold and paid in full
- May include treasury shares

Treasury Shares
- Shares acquired by the corporation but not retired and awaiting to be issued at a later date

Subscribed Share Capital

- Portion of the authorized share capital that has been subscribed but not yet fully paid
- Once Paid → Issued Share Capital

Outstanding Share Capital

- Shares issued that are in the hands of the shareholders
- [ Issued Share Capital – Treasury Shares)

Accounting for Share Capital

 Methods
o Memorandum Entry (Use if problem is silent)
o Journal Entry
 Basic Transactions
o Authorization
o Subscription to Share Capital
o Collection of Subscription Receivable
o Issuance of Share Capital

ILLUSTRATION (AUTHORIZATION): On January 1, 2012, Archers Corporation is authorized to issue

5,000 shares of 8% preference shares at a par value of P100 per share and 20,000 ordinary shares at a par value of
P50 per share

JOURNAL ENTRY METHOD

Unissued Preference Shares (5,000 x P100) P500,000
Unissued Ordinary Shares (20,000 x P50) P1,000,000
Authorized Preference Shares P500,000
Authorized Ordinary Shares P1,000,000

MEMORANDUM ENTRY METHOD

Memo Entry: The company was authorized to issue P500,000 preference shares, divided into 5,000 with 8%
and P100 par and P1,000,000 ordinary shares, divided into 20,000 shares with P50 par

Subscription and Collection of Shares

- Subscription of Incorporators: REQUIRED → 25% Subscription 25% Paid-up

ILLUSTRATION:
PREFERENCE ORDINARY PREFERENCE ORDINARY
Red 25,000 50,000 6,250 12,500
Blue 25,000 50,000 6,250 12,500
Mint 25,000 50,000 6,250 12,500
Yellow 25,000 50,000 6,250 12,500
Green 25,000 50,000 6,250 12,500
TOTAL 125,000250,00031,250 62,500

SUBSCRIPTION: JOURNAL ENTRY METHOD (Memo entry same)

Subscription Receivable – Preference 125,000
Subscription Receivable – Ordinary 250,000
Subscribed Preference Shares 125,000
Subscribed Ordinary Shares 250,000

COLLECTION (25%): JOURNAL ENTRY METHOD (Memo entry same)

Cash 93,750
Subscription Receivable – Preference (25% of 125,000) 31,250
Subscription Receivable – Ordinary (25% of 250,000) 62,500

FULL PAYMENT: JOURNAL ENTRY METHOD (Memo entry same) → Red

Cash 56,250
Subscription Receivable – Preference 18,750
Subscription Receivable – Ordinary 37,500

ISSUANCE: JOURNAL ENTRY METHOD → Red

Subscribed Preference Shares 25,000
Subscribed Ordinary Shares 50,000
Unissued Preference Shares 25,000
Unissued Ordinary Shares 50,000

ISSUANCE: MEMORANDUM ENTRY METHOD → Red

Subscribed Preference Shares 25,000
Subscribed Ordinary Shares 50,000
Preference Shares 25,000
Ordinary Shares 50,000

Accounting for Par Value Shares (Cash Consideration)

- A share may be sold at par value, above or below
 - Below par value is highly discouraged

PRICE DIFFERENCE
At par value 10 none
Above par value 15 share premium
Below par value 8 discount on share capital

ILLUSTRATION (SUBSCRIBED AT PAR VALUE): Corp A has authorized share capital of P100,000
at P50 par value per share. Assume 100 shares were subscribed at par value. Collected 30% down payment and
balance paid in full after 10 days.

SUBSCRIPTION
Subscription Receivable (100 x P50) P5,000
Subscribed Ordinary Shares P5,000

COLLECTION
Cash (P5,000 x 30%) P1,500
Subscription Receivable P1,500

Cash (P5,000 x 70%) P3,500

Subscription Receivable P3,500

ISSUANCE OF CERTIFICATE
Subscribed Ordinary Shares P5,000
Ordinary Shares P5,000
ILLUSTRATION (ABOVE PAR VALUE): Subscribed at P60 per share

SUBSCRIPTION
Subscription Receivable (100 x P60) P6,000
Subscribed Ordinary Shares (100 x 50) P5,000
Share Premium (100 x 10) P1,000

COLLECTION
Cash (P6,000 x 30%) P1,800
Subscription Receivable P1,800

Cash (6,000 x 70%) P4,200

Subscription Receivable P4,200

ISSUANCE OF CERTIFICATE
Subscribed Ordinary Shares P5,000
Ordinary Shares P5,000

ILLUSTRATION (BELOW PAR VALUE): Subscribed at P40 per share

SUBSCRIPTION
Subscription Receivable (100 x P40) P4,000
Discount on Share Capital P1,000
Share Premium (100 x 50) P5,000

COLLECTION
Cash (P4,000 x 30%) P1,200
Subscription Receivable P1,200

Cash (4,000 x 70%) P2,800

Subscription Receivable P2,800

ISSUANCE OF CERTIFICATE
Subscribed Ordinary Shares P5,000
Ordinary Shares P5,000

Accounting on Share Issued for Non-Cash Considerations

- Payment for share issuance other than cash

RULE 1 (Accounting on Share Issued for Non-Cash Considerations)

- If issued for tangible, intangible property and services, the share capital is recorded at an amount equal
to the following order of priority:
a. Fair Market Value of the Non-cash Consideration Received
b. Fair Market Value of the Share Capital Issued
c. Par Value of the Share Capital Issued

ILLUSTRATION (RULE 1): M Corp issued 1,000 shares with par value of P100 per share in exchange for a
parcel of land with a fair market value of P130,000. The fair market value per share is P110.

Land (FMV of land) P130,000

Ordinary Shares (1,000 x P100) P100,000
Share Premium (Excess) P30,000

Watered Share (ILLEGAL)

- Overvaluation of the stockholder’s equity resulting from overvalued asset values

Secret Reserve (ILLEGAL)

- Undervaluation of the stockholder’s equity resulting from undervalued asset values

RULE 2 (Accounting on Share Issued for Non-Cash Considerations)

- If issued for outstanding liability, the share capital is recorded at an amount equal to the liability set off

ILLUSTRATION (RULE 2): M Corp issued 1,000 shares with par value of P100 per share. The outstanding
loan obligation amounts to P120,000.

Loans Payable (Loan Outstanding) P120,000

Ordinary Shares (1,000 x P100) P100,000
 Share Premium (Excess) P20,000

RULE 3 (Accounting on Share Issued for Non-Cash Considerations)

- If issued in exchange for other equity securities, the measurements is equal to the to the following order
of priority:
 Fair Market Value of the Other Equity Securities Received
 Fair Market Value of the Share Capital Issued
 Par Value of the Share Capital Issued

ILLUSTRATION (RULE 3): M Corp issued 1,000 shares with par value of P100 per share in exchange for O
Inc. 1,000 equity shares. The fair market value of M Corp’s share is P120 and O Inc’s share is P110.

Investment in Stock-O Inc (1,000 x P110) P110,000

Ordinary Shares (1,000 x P100) P100,000
Share Premium (Excess) P10,000

Other Classification of Share Capital

1. Par Value Shares
- Has a nominal value stated on the face of the share certificate and fixed in the AOI
2. No Par Value Shares
- Has no nominal value stated on the face of the share certificate and fixed in the AOI
- May be sold by:
 Amount prescribed in the Articles of Incorporation
 Amount fixed by the Board of Directors
 Amount approved by the majority shareholder

Important Data for No Par Value Shares

- Accounting Standards provide that “shares without par value (No Par) may not be issued for a
consideration less than the value of five pesos per share”
- Banks, trust companies, insurance companies, and buildings and loan associations shall not be permitted
to issue “No Par Value” shares
- “No Par Value” shares may be with stated value or no stated value
- Accounting for No Par Value Shares will only be through the use of memorandum entry

ILLUSTRATION (ISSUED FOR CASH): Melon Corporation issued for cash 3,000 ordinary shares
with stated value of P25 per share

Case 1: Issued at P25 (At Stated Value)

Cash P75,000
Ordinary Shares P75,000
Case 2: Issued at P30 (Above Stated Value)
Cash P90,000
Ordinary Shares P75,000
Share Premium P15,000

Case 3: Issued at P20 (Below Stated Value)

Cash P60,000
Discount on Ordinary Share P15,000
Ordinary Shares P75,000

Issued for Non Cash Consideration

- At fair market value of the asset, share issued or stated value

ILLUSTRATION (CASE 1): O Corporation issued 1,000 ordinary shares with stated value of P25 per share in
exchange of the land. The land is selling at P35,000.

Land P35,000
Ordinary Shares P25,000
Share Premium P10,000

Issuance of No Par Value, No Stated Value

- When no par, no stated value shares were issued, no ordinary share capital in excess is being recognized

ILLUSTRATION (ISSUED FOR CASH): Melon Corporation issued for cash 500 ordinary shares
of no par value, no stated value. Issued at P10 per share

Cash P5,000
Ordinary Shares P5,000

Issuance of Non Cash Consideration

- At fair market value of the asset, share issued, or appraisal value of the asset

ILLUSTRATION (ISSUED FOR CASH): O Corporation issued 1,000 shares of no par, no stated
value in exchange of the land. The market value of the share was P20.

Land P20,000
Ordinary Shares P20,000

Basic Requirements of Treasury Shares

1. Corporation’s own share
2. It has been issued and fully paid
3. It is reacquired by the issuing corporation
 4. It is reacquired not for the purpose of cancellation

Forms of Acquisition
1. Purchase
2. Redemption
3. Donation
4. Through Other Legal Means

NO CORPORATION SHALL REACQUIRE ITS OWN SHARES OF WHATEVER CLASS, UNLESS IT HAS
ADEQUATE AMOUNT OF UNAPPROPRIATED OR UNRESTRICTED RETAINED EARNINGS (Retained
earnings is sufficient enough to pay treasury shares acquired)

ILLUSTRATION (TREASURY SHARES): Silver Corporation has the following balances:

Ordinary Shares, authorized to issue 1,000 shares,
P100 par value, 900 shares issued P90,000
Share Premium P10,000
Retained Earnings P50,000
On September 1, Silver Corporation acquired its own shares of 200 at P105

Treasury Shares (200 x P105) P21,000

Cash P21,000

ILLUSTRATION (SALE/RE-ISSUANCE OF TREASURY SHARES)

Assuming that on November 1, the 200 shares were sold as follows:
30 Shares for 105 (At Cost)
70 Shares for P120 (Above Cost)
100 Shares for P100 (Below Cost)

30 Shares @ P105
Cash (30 x 105) P3,100
Treasury Shares P3,150

70 Shares @ P120
Cash (70 x P120) P8,400
Treasury Shares (70 x 105) P7,350
Share Premium – TS (70 x 15) P1,050

100 Shares @ P100

Cash (100 x 100) P10,000
Share Premium – TS (100 x 5) P500
Treasury Shares (100 x105) P10,500
Retirement of Treasury Shares
1) Gain on Retirement
- Cost of treasury shares is less than par value
- Credited to share premium
 2) Loss on Retirement
- Cost of treasury shares is more than par value
- Debited to the following order:
 Share Premium – to the extent of the credit when share is issued
 Share Premium – treasury shares
 Retained Earnings

ILLUSTRATION (ABOVE PAR VALUE): The company reacquired 200 shares at P105 (Assume that shares
were originally issued at P103 with P100 par value). All the reacquired shares were then retired.

Entry for Purchase

Treasury Shares P21,000
Cash P21,000

Entry for Retirement

Ordinary Shares P20,000
Share Premium (103 – 100 x 200) P600
Retained Earnings P400
Treasury Shares P21,000

ILLUSTRATION (BELOW PAR): The company reacquired 200 shares at P75 (P100 par value). All the
reacquired shares were then retired.

Entry for Purchase

Treasury Shares P15,000
Cash P15,000

Entry for Retirement

Ordinary Shares P20,000
Treasury Shares P15,000
Share Premium P5,000

Delinquent Subscription

BOD may at any time declare due to Unpaid subscriptions will be declared
unpaid subscriptions (call) delinquent
ILLUSTRATION (DELINQUENT SUBSCRIPTION):
Highest Bidder – person who is willing to
pay the “offer price” for the smallest
1) X subscribes for 10,000 shares at par P100 Public Auction
number of shares
Subscription Receivable P1,000,000
Subscribed Share Capital P1,000,000

2) X pays initial payment of P600,000

Cash P600,000
Subscription Receivable P600,000
 3) Subscription balance is called and X defaulted
Receivable from Highest Bidder P400,000
Subscription Receivable P400,000

4) The corporation pays P30,000 for auction expenses

Receivable from Highest Bidder P30,000
Cash P30,000

5) A, is the highest bidder and pays the subscription balance of P400,000 plus interest of P20,000 and
auction expenses of P30,000 for a bid of 4,500 shares
Cash P450,000
Receivable from Highest Bidder P430,000
Interest Income P20,000

6) Issuance of share certificate X – 5500 shares A – 4500 shares

Subscribed Share Capital P1,000,000
Share Capital P1,000,000

7) No Bidders = Reacquired by the Company

Treasury Shares P450,000
Subscription Receivable P400,000
Interest Income P20,000
Advances on Delinquency Sale P30,000

Subscribed Share Capital P1,000,000

Share Capital P1,000,000

Donated Capital
1) Donations with Insignificant Amount
Asset xxx
Share Premium xxx
2) Donations with Significant Amount
Asset xxx
Donated Capital xxx

3) Memo Entry for Donations in Shares

- No effect on Asset, Liabilities, and Shareholder’s Equity
- Affects the number of shares outstanding – reduced
- Sale on these shares will increase assets and shareholder’s equity by DR Cash and CR Donated
Capital

RETAINED EARNINGS
- All profit of the company will go to retained earnings
- Income and expense account is closed to this account
 - Basic source is profit
- Owner’s equity account representing claim on all assets
- Accumulated profits and losses of the corporation
- Normal balance side is CR

 Profit for the period

 Loss for the period
 Reversal of Appropriation
 Dividends declared
 Appropriation for:
expansion, contingencies, etc

DEBIT BALANCE = DEFICIT

RETAINED EARNINGS CLASSIFICATION

1. Appropriated
- Restricted
- Not available for dividend distribution
- Segregated for special purpose
2. Unapproriated
- Free to be used
- Can be declared as dividends

DIVIDENDS
- Shareholder’s share of a corporation’s accumulated profits and losses
- Distributions to shareholders of cash, property, or stocks from unrestricted/unappropriated retained
earnings
- Declared by the BOD for cash dividends and 2/3 of outstanding shareholders for share dividends

Important Dates to Remember

1. Date of Declaration
- Board of Directors approved the resolution

Retained Earnings xxx

Cash Dividends Payable xxx

2. Date of Shareholder of Record

- Share and transfer book will be closed to determine who are the shareholders entitled to the
dividend

No entry

3. Date of Payment
- Dividends are distributed

Cash Dividends Payable xxx

Cash xxx

Who are entitled to Dividends?

 - Stockholders holding outstanding shares
- Stockholders holding subscribed par value shares
- Delinquent shares are not entitled to receive dividends until the subscription balance will be paid in full
- Unissued, subscribed, no-par and treasury shares are not entitled to dividends

Cash Dividends
- Declaration can be expressed as:
 A percentage of par or stated value
 A certain peso amount per share

Share – Based Compensation Plan

- A compensation arrangement in which the entity’s employees shall receive shares of stock in exchange of
their services or incurs liability to the employees in amounts based on the market price of company stock
- Types of share-based compensation plans:
 Equity settled (ex. Stock options)
- Entity issues equity instruments (stocks) in consideration of the services received
 Cash settled (ex. Stock appreciation rights)
- Entity incurs liability for services by employees based on the equity instruments
- Cash = agreed market price – current market price of stocks
Stock Option Plans
- Gives employees the option to buy
 A specified number of shares of the firm’s stock
 At a specified exercise price (usually lower than market price)
 During a specified period of time
- Stock options are granted to officers and key employees as part of their remuneration package as an
additional compensation

Methods of Measuring Compensation

 Fair Value Method (PFRS 2)
 Compensation or Compensation Expense = FV of Share Options on the Date of the Grant
 Intrinsic Method (use only if FV of share option cannot be estimated reliably/determined)
 Compensation or Compensation Expense = Intrinsic Value of Share Options
 Intrinsic Value = Market Price of the Shares – Option Price

Recognition of Compensation
 Vesting Period
 Period of time before shares in an employee stock option plan or benefits in a retirement plan are
unconditionally owned by an employee
 Vest Immediately (no vesting period = vest immediately)
 The employee is not required to complete a specified period of service before unconditionally
entitled to the share options.
 Entity shall recognize compensation expense in full with corresponding increase in equity
 Do Not Vest Until Employee Completes Specified Service Period (with vesting period)
  Compensation is recognized as expense over the service period or vesting period (date of grant to
exercise date)

ILLUSTRATION (NO VESTING PERIOD): On January 1 2019, share options are granted to employees to
purchase 100,000 ordinary shares of P50 par at P60 per share. On this date, share options has a fair value of P20
and are exercisable immediately. The employees exercised all their share options on December 31 2019.

Entry on January 1 2019

Salaries – Share Options (100,000 x P20) P2,000,000
Share Options Outstanding P2,000,000 *part of share premium

Entry on December 31, 2019

Cash (100,000 x P60) P6,000,000
Share Options Outstanding P2,000,000
Ordinary Share Capital (100,000 x P50) P5,000,000
Share Premium P3,000,000

ILLUSTRATION (WITH VESTING PERIOD): On January 1 2019, share options are granted to
employees to purchase 100,000 ordinary shares of P50 par at P60 per share. On this date, share options has a fair
value of P20 and are entitled only after completing two years of service. The options can be exercised starting
January 1 2021 and expire 1 year after. The employees exercised all their share options on December 31 2019.

Entry on January 1 2019 (Date of Grant)

Memo Entry: The company granted share options to its employees for a total compensation of P2,000,000
(100,000 x 20).

Entry on December 31, 2019

Salaries – Share Options (100,000 x P20 / 2) P1,000,000 *2=vesting period
Share Options Outstanding P1,000,000

Entry on December 31, 2020

Salaries – Share Options (100,000 x P20 / 2) P1,000,000
Share Options Outstanding P1,000,000

Entry on December 31, 2021

Cash (100,000 x P60) P6,000,000
Share Options Outstanding P2,000,000
Ordinary Share Capital (100,000 x P50) P5,000,000
Share Premium P3,000,000

ILLUSTRATION (WITH VESTING PERIOD; SOME EMPLOYEES LEFT): On January 1 2019, an

entity granted 100 share options each to 500 employees and vest at the end of the 3-year period. On grant date,
each option has a fair market value of P30.
By December 31, 2019, 30 employees left and it is expected that is further probable that 30 employees will leave
during the vesting period

No of Employees 500 Total Share Options 44,000

Employees who left (30) x Fair Value of Option P30
Employees who are expected to leave (30) Total Compensation P1,320,000
Employees entitled to share options 440 Divide by: Vesting Period 3 years
x Share options per Employee 100 Compensation Expense for 2021 P440,000

By December 31, 2020, 28 employees left and it is expected that it is further probable that 25 employees will
leave during 2021.

No of Employees 500 Total Share Options 41,700

Employees who left in 2019 (30) x Fair Value of Option P30
Employees who left in 2020 (28) Total Compensation P1,251,000
Employees who are expected to Divide by: Vesting Period 3 years
leave in 2021 (25) Compensation Expense for 2021 P834,000 (417K each
Employees entitled to share options 417 year)
x Share options per Employee 100 Less: Compensation for 2019 (440,000)
Compensation Expense for 2020 P394,000

ILLUSTRATION (WITH CONDITION AND SHARE OPTIONS VARY):

On January 1, 2019, an entity granted share options each to 300 employees and vest at the end of the 3-year
period provided that the employee remain employed and the volume of sales will increase at an average of 10%
per year. On grant date, each option has a fair market value of P20.

If sales increase by an average of 10%, each employee will receive 200 share options. If sale increase by an
average of 15% per year, each employee will receive 300 share options.

By 2019, the sales increased by 10% and the entity expects this rate will continue to increase in the next years.

No of Employees 300 Total Compensation P1,200,000

x Share Options per Employee 200 Divide by: Vesting Period 3 years
Total Share Options 60,000 Compensation Expense for 2019 P400,000
x Fair Value of Option P20

By 2020, the sales increased by 20% resulting in an average of 15% for the 2 years to date.
No of Employees 300 Total Compensation P1,800,000
x Share Options per Employee 300 Divide by: Vesting Period 3 years
Compensation Expense for 2019 P1,200,000
Total Share Options 90,000
600,000 per year x 2 years
x Fair Value of Option P20 Less: Compensation for 2019 (400,000)
Compensation Expense for 2020 800,000

By 2021, the sales increased by an average of 16%, over 3 years. By the end of 2021, 20 employees left the entity.

No of Employees 300 x Fair Value of Option P20

Employees who left in 2021 (20) Total Compensation P1,680,000
Less: Compensation for 2019 (400,000)
Employees entitled to share options 280
Less: Compensation for 2020 (800,000)
x Share Options per Employee 300 Compensation Expense for 2021 P480,000
Total Share Options 84,000
ILLUSTRATION (WITH CONDITION AND EXERCISE PRICE VARY):
On January 1, 2019, an entity granted to a senior executive 20,000 share options, conditional upon the executive’s
remaining in the entity’s employ until December 31, 2021. The par value per share is P50. The exercise price is
P100. However, the exercise price drops to P80 if the entity’s earnings increase by at least an average of 10% per
year over the 3-year period. On grant date, the entity estimates that the fair market value of the option is P30 if the
exercise price P80. If the exercise price is P100, the fair value of the option is P25

During 2019 and 2020, the earnings increased by 12% and 11% respectively. However, during the 2021, the
earnings increased only by 4%.

2019 2021
Total Share Options 20,000 Total Share Options 20,000
x Fair Value of Option P30 x Fair Value of Option P25
Total Compensation P600,000 Total Compensation P500,000
Divided by: Vesting Period 3 years Compensation Expense for
Compensation Expense for 2019P200,000 2019 and 2020 (200k per year) (P400,000)
Compensation Expense for 2021P100,000
2020
Total Share Options 20,000
x Fair Value of Option P30
Total Compensation P600,000
Divided by: Vesting Period 3 years
Compensation Expense for 2019P400,000
200,000 per year (2019 and 2020)
Less: Compensation Expense (P200,000)
Compensation Expense for 2020P200,000

ILLUSTRATION (INTRINSIC VALUE METHOD):

On January 1, 2017, an entity granted 10,000 share options to employees. The share options vest on December 31,
2019 provided the employees remain in service.
The fair value of the share option cannot be estimated reliably. The par value per ordinary share is P100. The
option price is P125 and the market value of the share is also P125 at the date of the grant. All the share options
vested on December 31, 2019 and no employees left the entity.
The share options can be exercised starting January 1, 2019 and will expire 2 years after. All share options are
exercised on December 31, 2019. The share market prices are P150 on December 31, 2019, P180 on December
31, 2019 and P200 on December 31, 2019.
If the fair market value of the share options cannot be estimated reliably, the entity shall measure the share
options at their intrinsic value initially and subsequently at each reporting date and at the date of final settlement,
with any change in intrinsic value recognized in profit or loss.
2017 2019
Market Value – 2017 P150 Market Value – 2019 P200
Market Value – 2018 P180
Increase in Intrinsic Value P20
x Share Options 10,000
Additional Compensation in 2019 P200,000
Less: Option Price P125
Intrinsic Value of the Option P25
x Share Options P10,000
Total Compensation P250,000
Divide by: Vesting Period 2 years
Compensation Expense for 2017P125,000

2018
Market Value – 2018 P180
Less: Option Price P125
Intrinsic Value of the Option P55
x Share Options 10,000
Total Compensation P550,000
Less: Compensation for 2017 (P125,000)
Compensation Expense for 2018P425,000

Acceleration of Vesting
- If the entity cancels or settles a grant of share options during the vesting period:
 Recognize expenses immediately
 Any payment made to the employee shall be accounted as a repurchase of equity interest or
instrument (deduction of equity)