Accounting for employee share-based payments
Relieving the burden
Background
The fair value accounting standards for employee share-based payments can cause a headache for many finance departments. Our team has a thorough knowledge of IFRS2 and FRS20 and has helped many companies understand the requirements.
Our client base ranges from FTSE 100 companies through to AIM listed and unlisted companies.
We have a suite of modelling tools, including Black-Scholes, binomial models, and Monte Carlo models, which allow us to value even the most complex awards efficiently.
How LCP can help you
Our approach is tailored to meet the particular needs of each client.
- Our suite of models allows us to use the most cost-effective solution
- We offer a full range of services including provision of full accounting entries with draft disclosures
- Alternatively, we can work with your finance team to provide fair value results for you to input to your own accounting systems
- Our reports have passed inspection by a wide range of auditors including all the ‘Big 4’
- We can calculate accounting entries for deferred tax and NI provisions in respect of share plans
Next steps
To find out more about LCP’s employee share plan services, please
email us or call
Matthew Pearlman on +44 (0)20 7439 2266 or
Ian Gamon on +44 (0)1962 870060.
Main features of IFRS2/FRS20
- Fair value of the award is determined at date of grant
- The fair value takes account of the volatility of the share price and the expected exercise behaviour of the award-holders
- Additional complexity if there are performance-based vesting conditions
- This fair value is expensed in the profit and loss over the vesting period of the award
- Allowance is made for expected turnover of employees
- If awards are settled in cash, accounting is more complex.
Our actuarial binomial model takes the underlying mathematics of the Black-Scholes formula and
builds upon it to allow for the specific features of employee share options.
