IFRS2 wipes £4.6bn profit from FTSE 100

News Article - 24 May 2012
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FTSE 100 companies saw £4.6 billion wiped off their profit margins due to International Financial Reporting Standard 2 (IFRS2) requirements on staff share awards last year.

Under the rules, companies are now required to list the awards as expenses. Technology firms were the hardest hit, with profits falling an average 12 per cent.

Profits fell by an average two per cent across the FTSE 250, but in some cases rose to as high as 34 and 44 per cent, said the PricewaterhouseCoopers (PwC) report.

"Companies need to strike a balance between having a share plan that motivates their people, while minimising the impact on profits," said Graham Ward-Thompson of PwC.

He added that share options were "expensive compared with the benefits they deliver", providing an incentive only if company share prices increase.

Performance share plans can provide a staff dividend regardless of stock prices he said.

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