The decision was handed down by the international accounting rulemaking body as part of an update on the progress of a finalization of ED 2 Share-Based Payment, originally issued in November (See IASB Releases Option Expensing Proposal ). Ultimately, the IASB said it now anticipates the final regulations will be published in the first quarter of 2004, with an effective date of January 1, 2005.
Under ED 2 companies would be required to estimate the fair market value of employee share-ownership plans (including shares, options and cash payments) from the date of grant – defined by the IASB as the date the employee accepts the commitment for a share-based payment arrangement . Companies would then have to disclose how they arrived at the fair value measurement. The estimation would then be deducted from company profits.
However, institutional investors have pushed for exemptions for all employee plans, fearing that many companies could abandon the benefits. The delay was caused after opponents in July highlighted inconsistencies between the exposure draft on share-based payments and another international accounting standard – IAS32 – on financial instruments (See IASB Pushing Back Equity-Based Compensation Rules ).
A complete copy of the IASB’s update can be found at http://www.iasb.org.uk/docs/bdpapers/2003/0309ob08.pdf .