A Survival Guide to Running a Share Plan and Escaping the Weighted Average Time Monster

November 4, 2019 Christian Hyldig

 

Running a share plan for your employees means constant communication with your shareholders and other key stakeholders. Important guidelines for your communications can be found in the accounting standard, which includes an IFRS2 Disclosure section on what to include in your annual report. This section outlines the regulation, explains the weighted average number calculation, and gives the reasoning behind its use.

Directors’ remuneration policy and report

With an increased focus on corporate governance, regulators are constantly expanding the scope of information required for companies to report on their key staff. But, when it comes to the information required, there are several overlapping areas. This makes the ease with which you can collect data on individuals and/or selected employee groups critical.

Is it complicated to make this a successful process?

Luckily, IFRS 2 has some good guidance on what to include in your share-based payment disclosure. IFRS 2:44-52 is very detailed, and clearly states what information is needed.

Your share-based payment disclosure will link information from your company’s share plan records, and financial reporting data. This means combining different data sources, which can lead to its own set of complications – you may find the same level of detail is not always stored across the various data points.

For example, if your finance team only has access to group level reports, it can be a time-consuming exercise to convert this data to business unit/OpCo or to an individual level. For your remuneration report, it can also be a real challenge to identify all the data for the few key employees that need to be reported on in detail.

So, you’ll be pleased to know that once you’ve collated all of the data that’s available to you, calculating the weighted average in Excel is simple.

For the weighted average exercise price on granted units in period “IFRS 2:45(b)(II)” the formula is:-

‘=SUMPRODUCT(AAA,BBB)/SUM(BBB)’, where “AAA” is Exercise price & “BBB” is Granted units

But, before we get too excited, it’s important to understand that even though the calculation is simple, problems can still arise due to the reasons below:

  • The quality of the underlying data
  • The level of detail needed
  • The need for a complete audit trail
  • Time wasted on manual controls

Remember, Excel is a great tool but can be costly in an audit!

Your successful process for the future

With a higher regulatory awareness on corporate governance, we can only expect that this area will receive greater attention going forward, and there will be an increased demand for detailed disclosure and reporting (with a robust audit trail). Therefore, it might be time to look around for a more futureproof solution than Excel, a solution that can combine data sources easily, and that can give you the detail you need along with confidence in your numbers.

KEY TAKEAWAYS

  • The ease with which you can collect data on individuals and /or selected groups of employees is critical.
  • IFRS 2 has some good guidance on what to include in your share-based payment disclosure. IFRS 2:44-52 is very detailed, and clearly states what information you need.
  • Even though the calculation is simple, problems can still arise because of the quality of the underlying data, the level of detail, and the need for a complete audit trail.
  • Excel is a great tool but can be costly in an audit!

Learn more about Shareworks today and how it delivers audit-ready accuracy with complete reporting freedom.

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