Theoretical Foundations Of Share Based Payment Research

Advanced Financial Reporting and Theory
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Advanced Financial Reporting and Theory
Introduction
The main objective of IFRS is to offer guidance on financial reporting more so when a share based payment transactions. More specifically, the IFRS standard requires that a reporting entity reflects in its P&L and other necessary financial records the impact of share-based payment including expenses related to share options given to employees. Transfer of equity instruments to people who have provided services including employees or suppliers should be treated as share-based payment. The general relationship between the manager and other stakeholders should be put into consideration when determining if such a manager is a principal or an agent. This is essential when making decisions where an entity is engaged in share-payment transactions. The ensuing discussion explicates how share-based transactions should be treated in financial reporting and how to maintain flexible accounting principles.
Theoretical Foundations of Share based payment
Theoretical propositions have directly connected monetary incentives with output. However, these theories have been untested over the years making one of the contested issues in regard to performance payment and incentives on the side of workers. It is highly agreed that paying on the basis of individual performance helps in increasing the performance and productivity of employees. Different models have been developed to explain the relationship between pay and performance and share-based performance (Grabski, Leech & Schmidt, 2011). Much of the existing research on the effects of monetary incentives has focused on productivity but there exists extensive research to show that as productivity increases, an organization will be able to attract a more capable human resource force and difference in output which will in turn make it possible to differentiate itself among competitors and across rising shift rates.
Under PAT, all employees are required to execute their responsibilities in accordance with the prescribed rules of the organization besides having a clear plan of how they are supposed to execute their business. In the absence of such a plan, more energy will be consumed whilst very little achievement will be made. A plan with clear cut targets can help all employees or team members to carry out their responsibilities and work towards the completion of the project. Positive accounting theory helps the organization to engage its staff and supervisors in a meaningful appraisal process (Christensen, Hail & Leuz, 2013). In essence, positive accounting theory helps an organization to attract more workforces as compared with share-based payment.
Organizations with share-based pay/compensation have a high likelihood of experiencing greater income tax volatility and meaningful effect on earnings and income per share. Whilst it is possible to model the possible effects, the possible forecast accuracy is dependent on the exactitude of the outlined assumptions which will in this case differ from one organization to the other. For example, organizations would be required to estimate the timing of their option exercises and award expi...