Benchmarking UK IFRS2 Charges

Research Paper, Graham Ward-Thompson


November 2019




International Financial Reporting Standard No 2 (IFRS2) has been a part of the share plan landscape since 2004.  Although the scope of IFRS2 is wider than employee share incentive arrangements, its main impact is in this area.  The principle is that if employees are receiving share awards as a part of their remuneration package, these awards must have been given in exchange for services provided or to be provided by the employees.  The services must have a value and, in the absence of an objective method by which to value the services delivered, IFRS2 suggests that the share based payment itself should be valued.


There are now a series of well recognised steps that can be taken to arrive at such values. This article does not cover these.


When IFRS2 was proposed and then introduced, share plan advisors and administrators were up in arms at the potential impact on a Finance Director’s willingness to approve the making of further share plan awards to employees. Many commentators argued that there was no value to a share plan award.  On the other hand, a colleague in my old firm’s accounting standards group commented – “if I were an employee and I received a three year share plan award I would be more likely to take my wife out in the evening for a fish and chip supper to celebrate.  That being the case, the award has a value, is part of my employment package and should be expensed”.


Some fifteen years later IFRS2 is still with us and share plan usage doesn’t seem to have changed; I eat less fish and chips than I used to.


What we thought would be of interest is to look at the current level of IFRS2 charge booked by UK companies in order to provide our clients with some indicator as to where they sit against their peers.  We have therefore analysed the IFRS2 charges booked by members of the FTSE350 over the past year[i] (further comparable analysis may follow in the AIM sector). Such an analysis will help finance functions understand how the charge they are booking compares to other UK companies.


Data sources


Thomson Reuters Eikon was used to extract the required data.  Where data was missing this was augmented by a review of the published accounts.


A relevant IFRS2 metric

Comparing absolute IFRS2 charges would be a fairly meaningless exercise, we therefore considered how to make this comparable between companies.  We looked at applying the IFRS2 charge as a percentage of Revenue, Operating Profit or total employment costs (all of this data was collected).  On balance we decided that the most obvious comparison was to employment cost.  The calculation we have used applies the IFRS2 charge as a percentage of total employment costs (including IFRS2 itself).



10% of the FTSE 350 do not operate share plans


Out of the 350 companies analysed, 35 booked no charge for IFRS2 (nor in prior years).  We have assumed that these companies do not operate share incentive arrangements and have excluded them from our analysis. (This aversion to share plans was not confined to any one sector although Financial Services and Real Estate are larger contributors to this group).


Median IFRS2 charge across the FTSE 350 is 2.19% of employment costs but the highest is 97%!


For the remaining 315 companies, the median IFRS2 charge as a percentage of total employment costs is 2.19%.  This is not huge.


This figure masks a wide variation, with the highest percentage being over 97% and the lowest being -4.05% - a reversal of IFRS2.


There were only five cases in the 350 where a reversal in IFRS2 charge arose.  Reversals typically arise where a non-market award fails; an assumption as to the outcome of a non-market award is changed (lowered) or there are significant forfeitures as a result of early leavers.


The graph below shows the overall spread of charges.
















The following additional stats may also be interesting:







Sector differences are more interesting


The overall results mask significant differences between sectors, with the Construction and Materials sectors generally having the lower charge in relation to employment costs and Energy, FS and Real Estate having the higher charges (see graph below).










Further Information


For further information or help in benchmarking your particular charge to a group of comparators contact Howells on +44 (0)1423 812800 or

i - The data accessed generally covered financial statements up to June 2019 (most being December 2018 year ends).

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For more information, contact

Howells Associates Ltd

+44 (0)1423 812 800

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