Examiner's Answers
F2 - Financial Management
March 2014
Some of the answers that follow are fuller and more comprehensive than would be expected from a well-prepared candidate. They have been written in this way to aid teaching, study and revision for tutors and candidates alike.

SECTION A
Question One
Rationale
This question was intended to test two of the key areas in Syllabus Section B, being share-based payments and retirement benefits. The share-based part requires knowledge and practical application of IFRS 2 and an understanding of why the requirements are necessary.
The pension section focuses on the accounting rules for a defined benefit plan and includes the revised rules for accounting for past service costs.
This question examined learning outcome B1(f).

Suggested Approach
Candidates should have been familiar with the format required for the answer and those who had completed past exam questions in their studies are likely to have prepared their workings in the format shown in this answer.

Financial Management

1

March 2014

(a)
(i)

Statement of profit or loss charge:

2013 expense:
Eligible employees (800-20-55) = 725
Equivalent cost = 725 employees x 500 options x FV$6 = $2,175,000
Allocate over 4 year vesting period $2,175,000/4 = $543,750 charge for the year.
The 2013 expense will be recorded as:
Dr

staff costs
Cr

(ii)

$543,750 equity (other reserves)

$543,750

Share options, such as those granted by MR, are given by an entity in return for services provided by its employees. In effect the share options are given to the employees as a form of bonus or reward for these services and are therefore part of the employee’s remuneration package. The value of these options (or relevant part thereof) must then be reflected in the staff costs included within the statement of profit or loss.

(b)