Introduction to accounting for share-based payments
Produced in partnership with William Franklin
Introduction to accounting for share-based payments

The following Share Incentives practice note produced in partnership with William Franklin provides comprehensive and up to date legal information covering:

  • Introduction to accounting for share-based payments
  • Share-based payments
  • Cash-settled share based payments
  • Equity-settled share-based payments
  • Cash versus equity-settled share-based payments
  • Accounting and Brexit

Share-based payments

For entities that prepare financial statements under international accounting standards, the share-based payment (SBP) accounting standard—International Financial Reporting Standards (IFRS) 2 sets out the accounting rules for the awards of share options and other equity-based employee incentives. It has been effective for accounting periods since 1 January 2005.

From the same date, very similar accounting rules were brought in for entities that report under UK domestic accounting standards (and US accounting standards). In the UK for SBP accounting, the main relevant domestic standard is now Financial Reporting Standard (FRS) 102. Since 2005, IFRS 2 has not been fundamentally amended but there have been some changes and the Interpretations Committee (IC) of the International Accounting Standards Board (IASB) has given guidance on its application. The UK standard needs to be interpreted in the light of this guidance as well as the International Standard. With the advent of FRS 102, the number of unquoted companies within the scope of SBP has increased.

SBP accounting reflects the strongly held view of the IASB that financial statements should recognise the costs of all the goods and services an entity receives regardless of the form of the consideration paid by the entity and whether those goods and services can be specifically identified. This approach was a major departure from traditional historical transaction-based accounting and means the accounting expense needs to

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