To read the full version of this content please select one of the options below:

Should employee share options be expensed in an entity’s financial statements?

Z.Y. Sacho (School of Applied Accountancy, University of South Africa)
H.C. Wingard (School of Applied Accountancy, University of South Africa)

Meditari Accountancy Research

ISSN: 1022-2529

Article publication date: 1 October 2004

Abstract

This paper investigates the debate as to whether employee share options (ESOs) should be expensed in an entity’s financial statements as required by the IASB’s IFRS 2 – Share‐based payment (2004). The paper presents arguments for and against expensing ESOs, demonstrating that compensation of employees via ESOs is a bona fide expense in terms of the recognition and measurement criteria of the IASB Framework. It concludes that, the substance of an ESO transaction is that the entity pays an employee for his services, albeit with a different financial instrument. Consequently, the accounting treatment of such compensation should be the same as for any other payment of services of an employee.

Keywords

Citation

Sacho, Z.Y. and Wingard, H.C. (2004), "Should employee share options be expensed in an entity’s financial statements?", Meditari Accountancy Research, Vol. 12 No. 2, pp. 141-164. https://doi.org/10.1108/10222529200400020

Publisher

:

Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited