Share-based payment valuation for your ESOP, under IFRS 2.
VALLARIS™ measures the grant-date fair value of share options, restricted share units and performance shares, so the expense is right in the accounts and the plan does what it was designed to do.
What is share-based payment valuation?
Share-based payment valuation measures the fair value of equity awards given to employees and others, such as share options, restricted shares and performance shares, at the grant date. The fair value is expensed over the vesting period under IFRS 2 (SFRS(I) 2 in Singapore). Black-Scholes, binomial lattice and Monte Carlo models are used, chosen by the plan’s vesting and market conditions.
The moments this work is for.
A new employee share plan
You want the expense modelled before the plan is approved, so the design and the accounts agree.
Grants this year
Each grant needs a fair value at its grant date for the year-end accounts.
A plan is being changed
A modification, a repricing or a cash settlement needs the incremental value measured.
The work, and what it delivers.
- Grant-date fair valueFor each tranche, with the model that fits its conditions.
- Inputs documentedShare price, volatility, dividends, exercise behaviour and forfeiture.
- The expense scheduleThe charge by year, ready for the accounts.
- Modification accountingIncremental fair value when a plan is changed.
Four steps, one adviser.
- Plan termsRead the plan rules and grant letters.
- ConditionsSeparate service, performance and market conditions.
- ModelBlack-Scholes, binomial or Monte Carlo, as the conditions require.
- ReportA signed report and the expense schedule.
A named signature behind every number.
A share plan is a promise to your people, and the accounts have to show what it costs. I value each award against its own conditions, so the number stands up to the auditor.
Siong Yoong
About VALLARIS™ →
Standing you can check. Each line names the body behind it.
Chartered Valuer and Appraiser
CVA, Institute of Valuers and Appraisers, Singapore (IVAS).
The group that writes the standards
Member since 2018 of the IVAS Standards & Technical Working Group, which writes Singapore’s business valuation standards.
International Valuation Standards Council
Member, Memberships & Standards Recognition Committee, IVSC, the body that publishes the IVS.
What clients ask about share-based payment valuation.
What is IFRS 2?
IFRS 2 Share-based Payment requires a company to recognise an expense for shares and options granted to employees and others, measured at fair value. In Singapore it applies as SFRS(I) 2.
When is a share option valued?
Equity-settled awards are valued at the grant date and not remeasured. Cash-settled awards are remeasured at each reporting date until they are settled.
Which model should be used to value options?
Black-Scholes suits simple options with no market conditions. A binomial lattice handles early exercise. Monte Carlo simulation is needed for market conditions such as total shareholder return targets.
How is volatility set for a private company?
Usually from the historical volatility of comparable listed companies, adjusted for differences in size and leverage, because a private company has no traded share price.
What happens if we change the plan?
If a modification increases the fair value of the award, the incremental fair value at the modification date is expensed over the remaining vesting period, in addition to the original charge.
Often needed together.
Financial instrument valuation
Financial instrument valuation measures the fair value of instruments that have no quoted price, such as convertible notes, preference shares, warrants, earn-outs and intercompany loans.
Business valuation
A business valuation sets what a company is worth, on a stated basis of value and at a stated date.
Portfolio company valuation
Portfolio company valuation sets the fair value of a fund’s unlisted investments at each reporting date, as required by IFRS 13 and set out in the IPEV Valuation Guidelines.