Valuation of ESOPs

Valuation of ESOPs has been a matter of considerable discussion, internationally. Under SFAS 123 (US GAAP) and IFRS2 it is mandatory for every issuing company to account for the "Fair Value" of the employee stock options issued .

In India, the guidelines issued by SEBI and the Guidance Note on "Accounting for Employee Share Based Payments" issued by the Institute of Chartered Accountants of India, too suggest that the employee stock options be accounted using the "Fair Value" method, though this method is not compulsory yet. Even if this "Fair Value" method of accounting is not adopted, disclosure of the "Fair Value" needs to be made in the Notes to Accounts.