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Unformatted text preview: an others preparing according to high-quality sets of standards.”
Hence, the company states that the only acceptable solution would be a
disclosure approach as in the United States.
However, if IASB decides to proceed with the application of fair value based
method, Nokia present its opinion on the main issues. It believes that the grant
date is the date when stock-based compensation expense should be recognized.
Nokia agrees with the suggestion that option pricing models should be
modified when using them to estimate the employee stock options.
4.3.8 Barclays Bank
Barclays Bank (Barclays) is one of the largest financial services groups in the
United Kingdom. It offers both, retail and commercial banking services in and
outside United Kingdom with a bias toward continental Western Europe
Barclays does agree that share options issued to employees should be
recognized i n f inancial s tatements. T he m easurement b asis f or s uch
transactions should be the fair value of the options granted. The application of
option p ricing m odels i s j ustified i n B arclays’ o pinion; h owever, t he
assumptions made should be adjusted in order to incorporate the special
features of employee stock options. Further guidance with regard to option
pricing models should be provided in order to ensure a consistent treatment.
66 Barclays supports the grant date as a proper measurement date since this is the
date when company is valuing the services to be provided. Eventually the
transaction amount should be adjusted, in Barclays’ view, to take into account
the actual number of options that vest.
4.3.9 British Bankers’ Association
British Bankers' Association (BBA) is the leading trade association in the
banking and financial services industry, which represents banks and other
financial services firms in the United Kingdom. The members of the
association are of both UK and non-UK origin (www.bba.org.uk/public).
BBA admits that there are good arguments for including a charge in the income
statement when employee stock options are issued. However, it states that there
is no actual outflow of resources for the company. Therefore, IASB should
provide more justification for inclusion of this expense in the financial
statements, instead of showing it as a disclosure in the footnotes.
The a pplication o f o ption p ricing m odels t o m easure t he s tock-based
compensation expense is also questionable in BBA’s opinion. The value
produced by such models can be extremely subjective, especially in the markets
where similar options do not exist.
BBA does not support the use of vesting date as a measurement date. Instead, it
would be appropriate to use the grant date. The transaction charge should then
be spread over the service period in order to match the cost with benefits
4.3.10 European Commission
The European Commission (EC) fully supports IASB’s attempt to find an
internationally agreed approach to accounting for share-based payments. It
stresses, though, the impact the accounting issues addressed in the Discussion
Paper can have on the financial statements of many companies. In particular, it
can have a material impact on a company’s ability to pay dividends.
EC does not support the main conclusions presented in the Discussion Paper. It
questions the statements that the grant of share options to employees is a cost to
the company. It is only an opportunity cost, which is reflected by way of
dilution. In fact, this opportunity cost is already shown in company accounts as
a required disclosure. Hence, EC believes that the real debate should be focused
on first, whether it is appropriate to recognize opportunity costs in the income
statement and if so, whether it should be restricted to shares and options, and
67 second, if the current information about share-based transactions is inadequate
for accounts to show a true and fair value. 4.4 Review of Comment Letters Submitted on Invitation to
Comment “Accounting for Stock-Based Compensation: A
Comparison of FASB Statement No.123, Accounting for
Stock-Based Compensation and Its Related Interpretations,
and IASB Proposed IFRS Share-Based Payment”
Responses to the Invitation to Comment “Accounting for Stock-Based
Compensation: A Comparison of FASB Statement No. 123, Accounting for
Stock-Based Compensation and Its Related Interpretations, and IASB Proposed
IFRS Share-Based Payment” had to be submitted by February 1, 2003. Because
of the timing and general unavailability of the letters, we could analyse only
three Comment Letters released by the following organizations and published
on their websites. The dates of their letters are given in parentheses.
• The Investment Company Institute (2003)
• The Biotechnology Industry Organization (2003)
• The Committee on Corporate Reporting of Financial Executives
International and the Financial Reporting Committee of the Institute of
Management Accountants (2003)
4.4.1 The Investment Company Institute
The Investment Company In...
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- Fall '13