The Accounting Standards Board (ASB) has today issued an amendment to Financial Reporting Standard (FRS) 20 (IFRS 2) ‘Share-based Payment – Vesting Conditions and Cancellations’. The amendment clarifies the treatment of certain cancellations of options granted to employees, following similar amendments issued in January 2008 by the IASB.

Under FRS 20 and IFRS 2, where share options are granted to employees, the value of the option (at the grant date) is treated as an expense over the period in which services are received from the employees in exchange for the options – normally the period until the options can be exercised. Where an option is unable to be exercised because vesting conditions are not met (for example, if a performance target is not met, or the employee leaves the employment) the cost of the options is reversed. However, if the employer cancels the options, the full value of the options is charged to the profit and loss account.

The IASB has now issued an amendment which would clarify that, where options are cancelled by the employee (other than on leaving employment), such cancellations should be treated in the same way as cancellations by the employer.

FRS 20, effective for accounting periods beginning on or after 1 January 2005 for listed entities, and 1 January 2006 for unlisted entities, is in most respects identical to IFRS 2. The ASB is therefore making corresponding changes to FRS 20 to keep it in line with the international standard. The amendment will apply for accounting periods beginning on or after 1 January 2009, with earlier application permitted.

1. The ASB is an operating body of the Financial Reporting Council (FRC), the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the ASB, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the Committee on Corporate Governance.
2. The main role of the ASB is to issue accounting standards. The ASB collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) both in order to influence the development of international standards and in order to ensure that its standards are developed with due regard to international developments.
3. The ASB has eleven Board members, of whom two (the Chairman and the Technical Director) are full-time, and the remainder, who represent a variety of interests, are part-time.
4. Hard copies of the amendment to FRS 20 (IFRS 2) can be obtained at a cost of £10.00 (the same price as hard copies of the IASB’s equivalent amendment to IFRS 2), post-free, from FRC Publications, 145 London Road, Kingston upon Thames, Surrey KT2 6SR. Tel: 020 8247 1264; Web: www.frcpublications.com.
5. The IASB amendment is available from the IASCF Publications Department; e-mail: publications@iasb.org; Website: www.iasb.org.
6. Press enquiries should be addressed to Ian Mackintosh (Chairman) on 020 7492 2434, David Loweth (Technical Director) on 020 7492 2420 or Peter Godsall (Project Director) 020 7492 2426.