As the use of employeeoptions as compensationexpands
outsidetheUnitedStates,internationalaccountingstandards
havealsohadtograpplewithhowbesttodealwiththem.The
International Financial Reporting Standards Board released
IFRS 2 inFebruary2004,requiringcompaniesthatuseequity
options as compensation to value them atthe time of the
grant.Infact,IFRS 2 ismoreexpansivethanFAS123Rinits
coverage ofequity-based compensation. Forthemost part,
though,thetwostatementsagreemorethantheydisagreeand
thedifferencesthatremainareminor.Someofthemarelisted
here:
- Private versus public entities. IFRS 2 applies the
samerulesaboutoptionvaluationtobothpublicand
nonpublicentities;bothhavetovalueoptionsatfair
valueatthetime ofthegrantand treatthemasan
expense.WhileFAS123Rrequiresnonpublicentities
to account foroptions based on theirfairvalue, it
doesallowtheuseofindustryaveragevariancesin
valuingprivatecompanyoptionsandfortheuseof
intrinsic value (exercise value)when option model
inputs are difficult to obtain. - Deferredtaxtreatment. Intaxjurisdictions such as
theUnitedStates,whereonly theexercise valueof
the optionis taxdeductible (rather than theentire
valueofoptions),IFRS 2 requiresthatadeferredtax
asset be recognized only if and when the share
optionshaveexercisevaluethatcanbedeductiblefor
tax purposes. Therefore, options that are issued
at-the-moneywillnotcreatedeferredtaxassetsuntil
thataward isin-the-money.In contrast,FAS 123R
requiresrecognitionofadeferredtaxassetbasedon
thegrant-datefairvalueoftheaward.Theeffectsof