A Treasury select committee report, unveiled today, has endorsed global standard setters the IASB’s moves to publish a controversial rule that will require companies to book the cost of share options in the accounts, potentially knocking millions of pounds off the value of company balance sheets.
‘We believe that share options used for executive and other remuneration and payment should be prudently accounted for as future negative net income on a company’s profit and loss account,’ stated the report.
Last week Coca-Cola announced its intention to book share options as an expense in its accounts from the fourth quarter of this year. It was revealed yesterday that ARM, a UK-based technology company, is also looking at the issue.
The committee also urged both international and UK standard setters to issue a rule on aggressive earnings management ‘at an early date’. Aggressive earnings management is when directors book sales and revenues in the accounts before contract have been finalised.
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