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.