-An entity issued 100 shares each to its 1,000 employees subject to service condition of next 2 years. Grant date fair value of the share is INR 195 each. At end of 1st year, there is an expectation that 97% of the total 1,000 employees will remain in service till the end of vesting period. However, at the end of 2nd year the expected employees to remain in service would be 91% out of the total 1,000 employees. Calculate expense for the year 1 & 2.

To calculate the expense for the first and second year, we need to consider the number of shares issued, the fair value of each share, and the expected percentage of employees who will remain in service until the end of the vesting period.

Step 1: Calculate the total value of the shares issued. The entity issued 100 shares to each of its 1,000 employees, so a total of 100,000 shares were issued. The grant date fair value of each share is INR 195, so the total value of the shares issued is 100,000 shares * INR 195/share = INR 19,500,000.

Step 2: Calculate the expected expense for the first year. At the end of the first year, it is expected that 97% of the employees will remain in service until the end of the vesting period. So, the expected expense for the first year is 97% of the total value of the shares issued, which is 0.97 * INR 19,500,000 = INR 18,915,000.

Step 3: Calculate the expected expense for the second year. At the end of the second year, it is expected that 91% of the employees will remain in service until the end of the vesting period. However, since we have already accounted for 97% of the employees in the first year, we only need to account for the additional 4% that are expected to leave in the second year. So, the expected expense for the second year is 4% of the total value of the shares issued, which is 0.04 * INR 19,500,000 = INR 780,000.

So, the expense for the first year is INR 18,915,000 and the expense for the second year is INR 780,000.