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The Board is currently developing an Exposure Draft on accounting for share based payment. The Board's tentative conclusions to date include:

• 'in principle' all share based payment transactions should be recognised in the financial statements, resulting in the recognition of an expense in the income statement when the goods or services received are consumed;
• such transactions should be measured using a fair value measurement basis;
• when share based payment transactions are measured at the fair value of the equity instruments issued (or to be issued), fair value should be estimated at grant date;
• when an observable market price does not exist, an option pricing model should be used to estimate the fair value of share options.

Employee Share Purchase Plans

It was put forward that employee share purchase plans should not be exempt from the proposed exposure draft. The only reason that suggests that they should be exempt is that governments use such plans as vehicles to encourage wider ownership of company shares. However, this was not deemed to be a sufficiently persuasive point to allow exemption. The Board agreed that employee share purchase plans should not exempt from a standard on share based payments.

Non-Employee Share-Based Payment

Most respondents to the discussion paper agreed with valuation on a fair value basis. The only current guidance is the US EITF 96-18, which covers date of measurement. The Board agreed that the issue was to value goods and services as at grant date. The value of what was received for issuing shares was what was being measured i.e. the value of the goods and services.

Unlisted and Newly Listed Companies

With regard to unlisted companies, the issue is valuing the equity instrument, which is an option rather than a share. This is difficult, as the volatility of the share price is not known. In the US the minimum value method is used, but this is usually only for employee share based payments only.

It was decided that further research would be carried out, and the Board would revisit this issue in June. For newly listed companies the issue is simpler as they have a market share price. It was agreed that they would not be permitted to use the minimum value method. Any ED should give guidance on the estimation of volatility. This guidance should be based on or be the same as US GAAP guidance.

Repricing

It was agreed that the existing FAS 123 guidance should be used for repricing.