FTSE100 takes £1bn share option hit

The requirement for companies to expense share options under international
financial reporting standards could hit profits at the UK’s top 100 listed
companies by more than £1bn.

Estimates by actuarial firm Lane Clarke & Peacock show that the average
hit to a FTSE100 company from the introduction of IFRS2 on share-based payments
would be about £10m.

The firm predicted that publishing companies Pearson and Reed Elsevier would
be hit hardest by the standard, with reported pre-tax profit being reduced by
12% and 8% respectively.

Lane Clark & Peacock warned that the hits could have been much larger if
they had been introduced during the share price boom, when share option awards
were much more commonplace, and if the International Accounting Standards Board
had decided not to value the options at the time of issue.

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Fiona Westwood of Smith and Williamson.