Share option furore

The Accounting Standards Board is facing a frontline attack from companies that offer employees shares and share options following the publication last week of its proposals to force companies to show the costs of doing so in their profit and loss accounts.

David Rix, finance director of Yorkshire-based Shopcreator Developments, an e-commerce software company, told Accountancy Age: ‘It seems ASB chairman Sir David Tweedie has rather missed the point on the reasons why companies issue share options to employees. Options are much more a way of adding a shareholder dimension to their employment than dodging employment costs.’

Rix joins the growing chorus of companies like Sage, and Autonomy that have criticised the proposals.

Many employers, particularly those who rely heavily on share options and have volatile share prices, could see their bottom lines slashed if the proposal becomes a standard.

The likelihood of the standard being enforced came a step closer following the publication of the share-based payment standard by the International Accounting Standards Committee. Both the ASB and IASC worked closely with the G4+1 group, an international club of standard-setters, to develop the standard.One of the main arguments against accounting for share options is that they are difficult to value.

The ASB’s proposal will force companies to calculate the cost using the Black-Scholes formula for option pricing.

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