Help with share based payment

Gill Gittings

Hi All,

we have a client that is issuing a share based equity payment and has incurred expenses on this. Does anyone have any idea whether these expenses can be offset against the clients profits?

Thanks in advance

Steve Collings

This is a difficult one!

Generally, all expenses and losses should be regarded as such but it is arguable that such expenses relating to an equity-settled share base payment is not a loss because it does not result in a reduction in recorded net assets. I did some research into this issue for a course provider recently and Tech 7/03 (issued by ICAEW) makes it clear in other such contexts (e.g. revaluation reserves) that an unrealised reserve will be treated as having become realised by the amortisation or depreciation of the related asset. Therefore, assuming that the expenses have been included in the profit & loss account (income statement) as opposed to capitalised as part of the cost of the asset, the credit entry will be treated as a realised profit so there will be no impact on distributable reserves.

I hope that helps, but it is a very tricky subject!!

Gill Gittings

Aww thanks Steve, I appreciate your help. Our technical team couldn't seem to find anything on it as I don't think the UK has such standards.

My friend was saying she went to one of your lectures on accounting problems and said you were a fab speaker. I'm going to try and come on one of your courses soon. I am starting a new job in a couple of weeks so I'll see what happens with CPD courses as my current firm no longer pays for us to do courses.

Steve Collings

Gill Gittings wrote: »

Our technical team couldn't seem to find anything on it as I don't think the UK has such standards.

FRS 20.

Good luck with your new job and thank your friend for the kind feedback. I look forward to meeting you on one of my lectures.

Kind regards
Steve