This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

FRC conducts research bulletin into share option schemes used by private companies

  • FRC Image
  • UKGAAP Image

25 Apr 2013

Following the issue of FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' which provides simplified requirements for accounting for share-based payment schemes, the Financial Reporting Council (FRC) have conducted research into whether an even more simplified accounting approach could be developed for private companies. The FRC has issued a Bulletin which discusses preliminary findings from this review and ask for comments through the Invitation to Comment process.

Share options schemes are an alternative form of remuneration and are a common way to give employees a stake in a company; providing them with an incentive to work harder and more effectively.  The accounting for employee share option schemes is contained within IFRS 2 Share-based payment, FRS 20 Share-based payment (the UK equivalent standard) and the IFRS for SMEs.

The options pricing model required under these accounting frameworks can be a complex calculation and costly experience for private companies, not least as some of the inputs to the model such as share price and volatility of share price are not readily available.  The FRC has relaxed the strict application of this options pricing model for those UK companies applying the recently published FRS 102 who are permitted to use an alternative valuation model where share price information is not available. 

The question has arisen as to whether these requirements should be further relaxed for private companies, many of whom operate employee share-option schemes.  Suggestions being considered included allowing employee share options to be expensed based on their intrinsic value or allowing recognition upon exercise rather than grant date. 

The research bulletin, available on the FRC website, contains findings on the following questions:

  • Types of employee share option schemes and number of private companies that hold them
  • Objective of employee share-option schemes
  • Recognition
  • Measurement
  • Disclosure

Responses to the above questions are required by 31 July 2013.  The Invitation to comment is also available on the FRC website.

Related Topics

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.