EC formally endorses IFRS 2 for use in Europe

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08 Feb 2005

The European Commission has adopted a Regulation endorsing IFRS 2 Share-based Payment for use in Europe.

The Regulation takes effect retroactively to 1 January 2005. IFRS 2 requires companies to reflect the cost of all share-based payments, including employee stock options, as an expense. The text was supported almost unanimously by the Member States at the Accounting Regulatory Committee meeting on 20 December and by the European Parliament. A similar rule will go into effect in the United States beginning 15 June. EU Internal Market and Services Commissioner Charlie McCreevy said:

Endorsement of IFRS 2 is very much in the interest of European capital markets and European investors. Granting stock options can be a very effective way for companies to motivate managers and staff, but like any other form of remuneration, it has to be considered as an expense. IFRS 2 will improve the quality of financial reporting by giving financial markets a clearer and more complete picture of a company's transactions.

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