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Companies support accounting standard for share options

Almost two-thirds of companies support a new international accounting standard requiring them to expense employee share options in their financial statements, according to a survey by Mercer Human Resource Consulting.

The standard, IFRS 2, requires European-listed companies to make a charge in their income statements to reflect the ?fair value' of share awards granted to employees. The charge will make some organisations look significantly less profitable.

The survey, involving 70 respondents, found that 64% were in favour of the standard and its application, while over a quarter (27%) agreed with expensing share-based payments in principle but not with the IFRS 2 approach. Only 9% of respondents were against expensing for stock options in all cases. The standard comes into effect for accounting periods beginning on or after 1 January 2005.

Phil Turner, European Partner, said: "Accounting for share awards and options has been highly controversial, so it is surprising to see such widespread support from companies. There now seems to be a sense of acceptance, and an appreciation that the standard will help to improve comparability of company accounts in Europe." He said: "IFRS 2 represents a major change to previous accounting rules and companies will need to consider the wider impact on their share-based incentive schemes."

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