Staff Share Option Scheme — IFRS 2 Expense
Recording the monthly IFRS 2 charge for employee share options granted to senior management.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Share-Based Payment Expense (IFRS 2) | Expense (+) | 85,000.00 | - |
| Share Option Reserve (Equity) | Equity (+) | - | 85,000.00 |
💡 Accountant's Note
Under IFRS 2, share options granted to employees are recognized as an expense over the vesting period. The fair value at grant date is spread across the vesting period regardless of subsequent share price movements.
Practitioner & Systems Framework
💻 ERP Architecture
The IFRS 2 charge is calculated by the finance team or a specialist valuer using the Black-Scholes or binomial option pricing model at grant date. The total fair value of options granted is divided by the vesting period (typically 3-4 years) and the monthly expense is posted to the share-based payment expense account with the credit to the share option equity reserve. The calculation model is updated for changes in expected forfeitures (vesting condition adjustments). When options vest and are exercised, the share option reserve is transferred to share capital and share premium. Cash-settled share-based payments have a different accounting treatment (liability, not equity).
⚠️ Audit Flags
Auditors review and challenge the option valuation model inputs (share price, exercise price, expected life, volatility, risk-free rate, dividend yield). The volatility assumption for listed telecoms should be based on historical share price data. Test the forfeiture rate assumption — if actual forfeitures differ from estimates, a cumulative catch-up adjustment is required. Confirm the correct vesting period is used and that performance conditions are correctly reflected in the probability of vesting. For unlisted telecoms, market price evidence for the option valuation is more complex and requires additional scrutiny.
📄 Required Documentation
Option grant documentation (number of options, exercise price, grant date, vesting conditions), IFRS 2 option valuation model (Black-Scholes or binomial), key model inputs (share price, volatility source, risk-free rate), monthly expense calculation, forfeiture rate and adjustment methodology, share option reserve roll-forward, and exercise and lapse records.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.