Abstract:
PURPOSE – This study aims to investigate the post-implementation impact of expensing share-based
payment transactions on basic earnings per share. In recent years, IFRS 2 was one of the most opposed
and controversial standards issued by the IASB.
DESIGN / METHODOLOGY / APPROACH – The sample relates to the period immediately after
implementation (2006-2009) and consists of the 531 firm-year observations where share-based
payments were present among Johannesburg Stock Exchange listed companies. The effect of
share-based payments on basic earnings per share is assessed.
FINDINGS – The findings of this study show a statistically significant impact on basic earnings per
share, but the results are more modest than suggested by prior studies. The number of companies
reporting a share-based payment expense increased over the five-year period 2005-2009.
ORIGINALITY / VALUE – The introduction of IFRS 2 caused small but not necessarily immaterial changes
to the income profile of companies. This is important for analysts and general users of financial
information who need to be aware of these changes. The results also suggest that IFRS 2 did not
merely cause accounting policy changes, but has impacted on the way share-based payment
transactions are used by companies.
