Share-Based Payment

Date recorded:

A total of 281 replies were received in response to the re-issued G4+1 Discussion Paper. It was noted that 116 identical replies had been received from companies in the US, which broadly did not support the proposals. Responses were received from users in the UK, US, Canada, including fund managers, pension fund investors, and the Comptroller of the State of New York.

Replies from users of accounts said that they support an accounting standard on share based payments and that they would welcome more transparency in accounts. Preparers who responded were on the whole opposed to the recognition of share based payments and generally critical of the discussion paper. They preferred the US GAAP approach (disclosure of the value at grant date with expense recognition only if the exercise price is below market price at grant date).

Most preparers of accounts disagreed with the proposals on practical grounds, specifying the difficult of measurement. The actual basis of measurement put forward was agreed with, but some respondents asked why the IASB could not simply adopt US GAAP. It was noted that US GAAP theory does require measurement, but in practice the measurement always equals zero in order to get around this issue. Most respondents did not mention non-employee options.

The majority of respondents supported grant date as the correct measurement date. (The G4+1 paper had proposed vesting date.) This is because they considered that the contract was entered into at that date. Service date and vesting date were not well supported. Vesting date was not supported either, as it was deemed to cause volatility in the results.

An advisory group with 18 members has been formed to serve in a consulting role to the project. Members have been drawn from around the world and came from a very broad base including users, preparers, academics, auditors, regulators, valuation specialists, and company directors.

The Board also considered a conceptual issue raised by some of the respondents to the paper -- whether recognition of an expense arising from some share-based payment transactions is consistent with the definition of an expense in the IAS Framework. It was agreed to consider this further and to write a Basis for Conclusions to assist in resolving this issue. It was concluded that it might be necessary to modify the Framework to resolve this issue.

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