• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

K.R. Srivats

NEW DELHI, Jan. 3

THE Institute of Chartered Accountants of India (ICAI) hopes to lay down comprehensive accounting norms for Employee Stock Option Schemes (ESOPs) by mid-February. The detailed norms are also likely to cover the accounting treatment for the new forms of ESOPs that have emerged in the corporate environment.

"Our research committee will meet on January 18 to consider the draft proposals for a guidance note on ESOPs. If they are able to clear it, then our council can take it up at the next meeting in the first week of February," the ICAI President, Mr Ashok Chandak, told Business Line.

The proposed guidance note is expected to, among other issues, address the accounting for compensation cost in the case of options issue, which vests in a graded manner. The Securities and Exchange Board of India (SEBI) appointed Prof. J.R.Varma Committee on ESOPs had recently recommended that ESOP with graded vesting period can be recognised as several separate ESOPs and can be accounted for accordingly.

In general, most options have vesting schedules — which mean that an employee has to wait for a particular number of years before all the options can be used. The Naresh Chandra Committee on Corporate Audit and Governance, which recently submitted its report, had also pitched for gradual vesting in the case of stock options granted to non-executive directors

In its report, the Varma Committee had noted that companies may like to go for different variants of ESOPs where on the date of the grant, the exercise price or the vesting period or number of options is contingent on a future event that may be based on future performance, that is, performance-linked vesting (the number of options that would be granted and/or the vesting period of the options is linked to a specific performance parameter).

The accounting treatment of stock options has been a topic of intense debate ever since "billions of dollars have been lost in market capitalisation" in the US and Standard & Poor's recommendation that employee stock options be treated by companies in the US as a quarterly expense against earnings.

Send this article to Friends by E-Mail
Comment on this article to BLFeedback@thehindu.co.in

Stories in this Section
Dunlop to take up conversion jobs for other tyre majors — Ambattur unit to get priority

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line