MILES / Financial Reporting Valuation
Share-Based Payment and Share Option Valuation
Understand the value of equity incentives, from plan terms to valuation assumptions.
Discuss Your Share-Based Payment Valuation
Share option and share award plans can include different exercise terms, vesting arrangements and performance requirements. These terms affect the valuation analysis, which also needs to remain consistent with the accounting basis used for financial reporting.
MILES provides share-based payment valuation support to listed and private companies, covering employee share options, restricted stock units and other related awards. We help finance teams address valuation requirements under HKFRS 2 / IFRS 2.
When should you speak with us?
- You are introducing a new employee share option or share award plan.
- You need valuations for awards granted during the year.
- The plan includes share price, relative shareholder return or other performance conditions.
- Existing award terms have been modified and you need to assess the valuation implications.
- A private company needs to assess the underlying equity value relevant to its awards.
- Your auditors require further support for the model, volatility or other parameters.
How we help
Analyse plan terms
We review plan rules and grant documents to understand exercise prices, contractual terms, vesting conditions, settlement methods and other arrangements affecting valuation. We work with the finance team to clarify the valuation basis.
Select an appropriate model
We select valuation methods suited to the award terms and their complexity, such as Black–Scholes, binomial models or Monte Carlo simulation, and explain the rationale for the selection.
Develop well-supported parameters
We analyse inputs such as underlying equity value, volatility, expected term, dividends and risk-free interest rates, documenting data sources and key judgements.
Assess complex conditions and modifications
Within the agreed scope, we analyse the valuation implications of market conditions, different award tranches or modifications to award terms, helping management understand the results.
Provide reporting and auditor support
We provide valuation results and explanations of models and assumptions, respond to auditors’ valuation questions and support the finance team’s accounting process.
What information is typically required?
- Share award plan rules and grant documents
- Award quantities, exercise prices and relevant dates
- Vesting, performance, leaver and settlement provisions
- Historical exercise records and modification documents
- Ownership structure, financing and financial information for private companies
- Current financial reporting arrangements and relevant accounting judgements
If the plan includes multiple tranches or special conditions, we can first help organise the valuation scope.
Frequently asked questions
Can share options and restricted stock units use the same valuation model?
Their economic characteristics and terms may differ, so the same method may not be appropriate. Model selection should reflect the actual award arrangement.
Is a new valuation required every year?
This depends on the award’s classification and circumstances. For employee awards, equity-settled arrangements are generally measured using grant-date fair value, while cash-settled arrangements generally require remeasurement at each reporting date and at settlement. New grants and modifications may also require additional valuation work.
Does the valuation result equal the expense to be recognised for the year?
Not necessarily. Expense recognition also involves the vesting period, relevant conditions and other accounting judgements. The valuation result is one input into the finance team’s accounting assessment.
Accounting standard: IFRS 2
Clarify the terms and plan your valuation
Tell us the type of plan, whether your company is listed and your expected reporting date. We will discuss the analysis, information requirements and work plan with you.
Enquire About Share-Based Payment Valuation