EMPLOYEE SHARE OWNERSHIP
New accounting proposals for share schemes could hit profits
Research by New Bridge Street Consultants has found that a plan to make companies change the way employee share schemes are treated in profit and loss accounts could hit corporate profitability.
NBSC calculates that half of FTSE-100 businesses would see profits fall by at least 5% and as many as a third could see profits hit by 10% or more.
The background
The Accounting Standards Board (ASB) unveiled in July 2000 controversial new plans to make companies account more fully for the cost of employee share schemes.
Under the current arrangements, equity is used as a form of remuneration that does not hit profits. At present, the value of an option is deducted from profits only if it is in the money when granted — put simply, if the option price is below the price at which the company's shares are trading.
Sir David Tweedie, chair of the ASB, wants companies to treat the cost of shares and options given to staff as an operating expense in P& L accounts.
Want to know more?
New Bridge Street Consultants is a firm of management consultants, which specialises in the areas of executive remuneration, employee share schemes, and pensions. Take a look at www.nbsc.co.uk/news.htm for details of New Bridge Street Consultants’ response to the Accounting Standards Boards discussion paper.
Visit the Accounting Standards Board's web site . . . www.asb.org.uk
Jump to the Financial Times web site www.ft.com for a collection of articles on this controversial plan:
Bringing share options to book 9 November 2000.
Accounting plan threatens high-tech profits 8 November 2000.
Companies given no choice on revealing share options 21 July 2000.
Intelligible options 20 July 2000.
Radical accounting plan threatens companies' share option plans 20 July 2000.
Clear options: leader 20 July 2000.