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In an article that appeared in Business Review Weekly on 4 March 2004 (entitled ‘Share options...

In an article that appeared in Business Review Weekly on 4 March 2004 (entitled ‘Share options trap’), it is stated that under AASB 2 ‘companies must value and record as an expense any options granted to employees in exchange for their services. Previously, Australian companies recorded share-based payments in the notes to financial statements, arguing that share-based payments did not cost the company anything’. REQUIRED Do you think that there is any logic to the argument that ‘share-based payments did not cost the company anything’?

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Answer: Shares based payments are cost to company or not, it totally depends on for what purpose the shares have been issued. If shares have been issued for Assets acquisition, then such Share based payments should be capitalised to such Assets Account.

If shares have been issued for the purpose of goods received or on services rendered from employees, then such expense on shares based payments shall be treated as expense for the entity and should be charged to Profit or Loss Account of the organisation.

ekkarill92 answered 2 years ago
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