Jurisdiction(s):
United Kingdom

UK accounting for share-based payments: IFRS 2 and FRS 102 explained - equity vs cash-settled, fair value, vesting, modifications, net settlement, group/EBT treatment, and small/micro entity rules

Published by a LexisNexis Share Incentives expert

Practice notes

Share-based payments

Businesses typically recognise share-based payments as expenses in their profit and loss accounts, although lighter obligations may apply to small and micro entities. This Practice Note offers a high-level overview of the accounting for share-based payments. It is an introductory guide only. However, the subject is complex, so specialist professional advice should be sought on the accounting impact of different share incentive schemes.

For accounting purposes, share-based payments (SBPs) encompass:

share awards and share options, where settlement occurs through shares (known as equity-settled share-based payments); and
phantom share awards, share appreciation rights (SARs) and other cash awards or payments where the amount is linked to the value of the underlying shares (known as cash-settled share-based payments)

In essence, the accounting for an SBP depends upon whether settlement is in equity or cash. Where there is a choice between cash or shares, that election can also influence the accounting outcome. Group aspects may likewise be relevant (for example, where awards are provided to employees of a subsidiary company and the subsidiary is required to settle the...

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William Franklin

William is an experienced share schemes practitioner. He is also a Chartered Accountant who is widely recognised as a leading adviser on the valuation, accounting and financial aspects of all forms of remuneration, incentive and employee share schemes. He is a member of the HMRC Employment-Related Securities & Valuations sub-group, contributes to Tolley's Guidance on Employment Taxes. William has considerable experience of determining and agreeing with HMRC the market value for tax purposes of shares in unquoted companies. As a physics graduate, he is also able to advise on IFRS2 accounting and some of the more arcane aspects of option pricing mathematics. Together with David Pett, he first developed the joint share ownership plan (JSOP). William previously worked for Pinsent Masons and Ernst & Young. He has been an active supporter of junior local cricket and...

Web page updated on 22/05/2026

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