Employee Stock Options
IFRS 2 and Topic 718 (FAS 123R)
An overview of the financial accounting standards for companies that issue share-based payments such as employee stock options (ESOs) or share appreciation rights (SARs) are outlined below. Each overview contains a short description of the accounting regulation as it applies to “valuation" only. It does not specify the required methods for share-based payments, nor how taxes are treated. For a more complete and detailed description of each standard, it is recommended to visit the respective issuer’s website.
|IFRS 2||Topic 718 (FAS 123R)|
|Title||Share-Based Payment||Topic 718 Stock Compensation|
|Issuer||International Accounting Standards Board (IASB)||Financial Accounting Standards Board (FASB)|
|Effective||January 1, 2005||June 1, 2005|
|Overview||IFRS 2 requires that all share-based payments be recognised as an expense, at fair value measurement unless, for equity-settled transactions, that fair value cannot be estimated reliably. IFRS 2 encompasses the issuance of shares, or rights to shares, in return for services and goods. Examples include share appreciation rights, employee share purchase plans, etc.||Topic 718 mandates that all entities recognize the cost of employee stock options (ESOs) in their financial statements at fair value measurement. The same applies to other share-based payment awards in the form of options, shares, and share appreciation rights (SARs) granted to employees. The statement permits entities to use any option-pricing model but prefers lattice models.|
|How FINCAD can help||
FINCAD solutions contain various option-pricing models including Black-Scholes, lattice, and Hull-White basic and advanced models for valuing employee stock options. The Excel solutions also contain complete ESO workbooks.
Applicable FINCAD solutions:
Request a free demo of one of the above solutions
We hope that this information will assist you, but it should not be used or relied upon as a substitute for your own independent research. For a more comprehensive view of the standards/requirements, please visit the respective issuer's website.