When a company introduces a share incentive scheme for its directors and staff the valuation of the shares can be a key issue for both the company and staff. For example in the case of:
The characteristics of different share plans vary widely, as do the needs of our clients. To meet the range of needs, we have developed two complementary share plan valuation models: an Actuarial Binomial model and a Monte Carlo model. These models give us the flexibility to value share plans robustly and cost-effectively.
We provide tailored specialist support to a variety of clients (from several FTSE 100 listed companies down to AIM listed and private companies) under a number of accounting standards (including IFRS2, FRS20, FAS123, IAS12 and IAS24). We can provide:
Listed companies are required, from accounting periods starting after 1 January 2005, to expense to their profit and loss account the "fair value" of share options granted to employees. Any share options granted after 7 November 2002 and not vesting by the Effective Date of 1 January 2005 (or 1 January 2007 for unlisted and AIM companies) will need to be valued. The new international accounting standard (IFRS 2) specifies that the "fair value" should be derived using an option pricing model but leaves it up to the entity to decide the most suitable model in all the circumstances. Companies need to:
Download a summary of the valuation provisions of IFRS 2 / FRS 20, in PDF format.
An example of an assignment for an employee share scheme can be seen in the case studies.
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Valuation provisions of IFRS 2 / FRS 20
Case study of a valuation for an employee share scheme