The complexity of share-based payments can catch companies by surprise

Many companies offer employee share schemes, seeing them as a powerful tool to recruit, retain and motivate staff. There are various types – including save as you earn schemes and performance share plans. But what they all have in common is that companies need to account for them correctly as share-based payments.

This catches many companies by surprise. In some cases, the oversight is not discovered until the auditor comes in at year end, when it has to be addressed as a matter of urgency.

Companies are then faced with the complexity of share-based payment accounting, and will need to consider a whole range of factors to work out how to account for their scheme.

Share based payments is a specialist area – most finance professionals lack the knowledge and skills required. But if the share scheme is not accounted for, the auditor will not be able to sign off the accounts at year end.

How can First Actuarial help?

We provide a range of services in relation to share-based payments to help companies with employee share schemes.

We can support share-based payments by

  • Producing a fair valuation on your share scheme. This will tell the company how much money to account for the scheme. We will consider all relevant factors, including investment trends.
  • Discussing and explaining the underlying assumptions and how they affect the valuation
  • Complying with the relevant standards, principally FRS 102, the UK equivalent of the IFRS 2 international accounting standard
  • Identifying the right model to use – Black-Scholes, binominal or Monte-Carlo
  • Preparing the disclosures required by the accounting standards
  • Calculating the likely cash cost of the share awards.

Why choose First Actuarial?

We are actuaries – we build valuation models every day. As with pensions, we are valuing a future payment in the here and now.

We are excellent communicators, as our clients know. This is important with share-based payments, as the value calculated will only be as robust as the assumptions used. So we use clear and plain English to talk through those assumptions with clients. With our listening skills and clear explanations, we guide companies through the complexities of share-based payments.

We have extensive experience of working with both listed and unlisted companies, and we deal with all the main auditors.

We apply prescribed accounting processes seamlessly, and we take a pragmatic and proactive approach where appropriate.

We are often called in at short notice when year-end accounting takes place, and we can work within tight timescales. We then alert clients at an earlier point the following year, giving people plenty of time to plan and prepare.

Get in touch

Get in touch to find out more about our share-based payment services.

Extremely well organised, clear advice and always professional.

- Jim Wight, Arville Textiles Limited

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