The Hindu Business Line : ICAI guidance soon on employee share-based payments

The Institute of Chartered Accountants of India (ICAI) is set to release a guidance note on `Accounting for Employee Share-Based Payments' that would, among other things, recommend that the expense on employee share-based payments administered through trusts be recognised in the books of the enterprise itself rather than the books of the trust.

Informed sources pointed out that the existing guidelines on employee stock option plans (ESOPs) and employee share purchase plan (ESPP) issued by the Securities and Exchange Board of India (SEBI) do not cover situations in which an enterprise decides to make share-based payments through trusts.

The ICAI guidance note, when issued, will require expensing of employee stock options, stock appreciation rights and the shares offered under the employee share purchase plans, on the basis of the fair value method, although it permits use of intrinsic fair value method with extensive fair value disclosures.

The SEBI has also in the past indicated that it may withdraw its existing guidelines on accounting for ESOPs and ESPPs once the ICAI issues guidance note on the accounting for employee share-based payments.

"We are in dialogue with SEBI on this matter. SEBI may direct that companies must adhere to ICAI Guidance Note and withdraw its guidelines, " a senior ICAI official told Business Line.

The SEBI guidelines also give an option to follow either the fair value method or the intrinsic value method with fair value disclosures.

The ICAI guidance note is likely to provide detailed guidance on the measurement of fair value of the stock options as compared to SEBI guidelines. It may come into effect for the employee share-based payment plans, the grant date in respect of which falls on or after April 1, 2005.

An ICAI official claimed that the Institute's guidance note would be more detailed and comprehensive compared to that prescribed in the SEBI guidelines.

A number of aspects, such as performance conditions, modifications to the terms and conditions of the grant of shares or stock options, reload feature, cash-settled employee share-based payment plans, employee share-based payment plans with cash alternatives and earnings per share implications, dealt with in the guidance note are not specifically covered in the SEBI Guidelines, the ICAI official said.

More Stories on : ESOPs | Accounting Standards

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
ICAI guidance soon on employee share-based payments

M&A activity has slackened: KPMG

HPCL to get equity stake in IOC Panipat refinery

TVS Motor net up 12 pc — 2-stroke bikes drag on profit; 4-stroke sales up

Amul wants NDDB nominee on board out — Cites `conflict of business interest'

Sensex up 81.21 on value-hunting

Delhi, Mumbai airport FDI at 49 pc cleared

NRIs submit wish list to SEBI task force

As laws lag tech, grey market in ILD flourishes