Share-based Payment

Companies that remunerate their employees through share based payment transactions, whether shares or options, are now required to recognise an expense in the profit and loss account reflecting the cost of the issue of these shares and options. These transactions typically involve either issuing equity to employees or issuing cash based on the growth in value of the shares or phantom shares. Both equity and cash settled transactions must now be recognised in accordance with these new standards.

The expense is calculated as the fair value of the share or option at the date of grant. This expense is recongnised on the date of grant, unless there are vesting conditions attached to the shares or options, in which case the expense is spread over the period up to the vesting date.

The fair value must be adjusted to take into account the terms and conditions under which the shares and options are granted including the rights and restrictions that distinguish the instruments issued to employees from quoted shares and options.

Amercian Appraisal has considerable experience of complex share and option valuation techniques. We provide independent opinions of the fair value of shares and options in accordance with reporting requirements of IFRS 2, FRS 20 and SFAS 123. Auditors cannot provide companies with valuations of Share based Payment transactions for these purposes. For more information please contact us.