Option valuations, expense schedules and disclosure notes built by qualified actuaries, not adapted from a spreadsheet template.
IFRS 2 share-based payment valuation services calculate the fair value of share options, RSUs and similar awards, then convert that value into the expense, journal entries and disclosures your financial statements require. The valuation drives everything downstream. Get the inputs wrong and every number after it is wrong too.
And the accounting is the easy half. Fair value for an unlisted company means estimating volatility with no share price, expected term with no exercise history, and simulating a share price path when the award depends on total shareholder return.
Share options, restricted stock units, share appreciation rights, phantom shares, virtual stock option plans and employee stock ownership plans all fall inside IFRS 2, and what IFRS 2 covers sets out the scope in full. So do payments to suppliers settled in shares. If someone receives goods or services and the consideration is linked to your equity, the standard applies.
IFRS 2 itself has not changed. There is no active IASB amendment project on the standard, and the last substantive amendments landed in 2016, so it sits outside the standards taking effect in 2026. What has changed is how many companies in the Gulf now have share-based payments to account for.
Between 2022 and 2025 more than 80 companies completed listings on Tadawul and Nomu, raising over SAR 95 billion, and Saudi market capitalisation passed SAR 10.5 trillion by early 2026. Equity compensation followed the listings.
So the pressure is not regulatory. It is that a generation of founder-led companies now carries option plans that were never expensed, and a listing process is where that surfaces.
| Transaction type | Measured at | Remeasured? | Typical instruments |
|---|---|---|---|
| Equity-settled | Fair value at grant date | No. Grant date fair value is fixed and not revisited in later periods. | Share options, RSUs, ESOPs |
| Cash-settled | Fair value of the liability | Yes. Remeasured at each reporting date until settlement, with changes recognised in profit or loss. | SARs, phantom shares, most VSOPs |
| With net settlement features | Depends on the arrangement | Depends on classification. Withholding tax net settlement has its own treatment. | Awards with tax withholding |
That first distinction decides your volatility of earnings. A cash-settled plan puts a liability on your balance sheet that moves with your share price every reporting date. An equity-settled plan does not.
| Award feature | Model | Why |
|---|---|---|
| Plain vanilla option, service condition only | Black-Scholes-Merton | Closed form and defensible where there is no path dependency |
| Early exercise behaviour, or a long expected term | Binomial lattice | Handles exercise decisions at multiple points, which a closed form cannot |
| Market condition, such as a total shareholder return target | Monte Carlo simulation | The condition depends on the share price path, so the path has to be simulated |
| Cash-settled award | Same models, applied every reporting date | The liability is remeasured, so the model runs again each period |
Model choice is not cosmetic, and the measurement sits on the IFRS 13 fair value framework. Applying Black-Scholes to a TSR-linked award produces a number that will not survive review, because the model cannot see the condition that determines whether the award vests at all.
| Condition type | Example | Effect if not met |
|---|---|---|
| Service condition | Employee stays three years | Expense reversed. Estimate the number expected to vest and revise it each period. |
| Non-market performance condition | Revenue or EPS target | Expense reversed if the target is missed. |
| Market condition | Share price or TSR target | No reversal. The condition is built into grant date fair value, so the expense stands even if the target is never met. |
What teams need: historical expense calculated and comparatives restated before diligence starts.
How Prima solves it: we value every historical grant at its original grant date and rebuild the expense schedule year by year.
Bankers find this during diligence, not before. Finding it first is the difference between a workstream and a delay, and it is one of the compliance mistakes we see most often.
What teams need: an assumption a reviewer can trace to a source.
How Prima solves it: volatility built from a documented peer set, with the selection criteria and observation window recorded.
What teams need: the estimate of awards expected to vest updated each reporting period.
How Prima solves it: we rebuild the estimate from actual leaver data and true up the cumulative expense.
What teams need: modification accounting for repricing, extension or acceleration.
How Prima solves it: we value the award immediately before and after the change and recognise the incremental fair value over the remaining vesting period.
What teams need: a grant register that survives the person who built it leaving.
How Prima solves it: a structured register capturing every grant, tranche, condition and modification, with the expense engine separated from the data.
What teams need: one valuation, two compliant outputs, with the differences explained.
How Prima solves it: we run both bases from a single grant register and reconcile the gaps line by line.
Two tracks. Track A values and builds. Track B reviews what already exists.
| Service | What it means for your reporting |
|---|---|
| Share-based payment valuation | Grant date fair value calculated with the model the award actually requires, with every assumption sourced and dated. |
| Expense schedule and journal entries | Period-by-period expense across all grants and tranches, posted-ready, with the cumulative catch-up shown separately. |
| Grant register build | One structured record of every grant, condition and modification, so next year does not start from scratch. |
| Disclosure note drafting | The nature and extent of arrangements, the fair value determination and the effect on profit or loss, drafted ready for the accounts. |
| IFRS 2 and ASC 718 dual reporting | Both bases run from one register, with forfeiture and attribution differences reconciled for the group auditor. |
| IPO readiness support | Historical grants valued and comparatives restated on your listing timetable rather than during diligence. |
| Service | What it means for your reporting |
|---|---|
| Valuation and expense review | An independent read of your existing model and assumptions against IFRS 2, before the auditor gets there. |
| Audit response support | Technical responses on volatility, expected term and forfeiture challenges, prepared with your team. |
| Modification and cancellation review | Plan changes assessed and the incremental fair value quantified, including cancellations treated as accelerations. |
| Internal controls over equity records | Controls designed around grant data capture, so the register stays accurate between reporting dates. |
| Finance team training | Practical sessions on conditions, forfeitures and modifications, so the second cycle runs in-house. |
Five stages. At each one you know what has been completed and what comes next.
| Step 1: Collect |
We gather grant agreements, plan rules, tranche schedules and leaver history. | OUTPUT: Grant register with every award, condition and modification captured. |
| >>> | ||
| Step 2: Classify |
We determine equity-settled or cash-settled treatment and identify each condition type. | OUTPUT: Classification memo with the condition analysis. |
| >>> | ||
| Step 3: Value |
We select and run the model each award requires and document every input. | OUTPUT: Valuation report with assumption sources and sensitivities. |
| >>> | ||
| Step 4: Expense |
We build the period-by-period schedule, revise forfeitures and calculate any catch-up. | OUTPUT: Expense schedule and journal entries. |
| >>> | ||
| Step 5: Disclose |
We draft the note and prepare the audit response file. | OUTPUT: Disclosure draft and supporting evidence pack. |
Deferred and share-linked variable pay, often with regulatory deferral rules layered on top.
Awards over an unlisted parent, where fair value has no market reference at all.
ESOPs and RSUs at unlisted companies, where volatility has to be built from a peer set rather than observed.
LTIPs with performance conditions, reported alongside IFRS 17 measurement.
Plant-level CGUs where a single line can be largely independent, and idle capacity is a live indicator.
Broad-based plans with high headcount and high attrition, where the forfeiture estimate drives the number.
Project-linked incentive schemes that often fail the definition of a vesting condition.
Group-issued awards needing both IFRS 2 and ASC 718 outputs.
TSR-linked awards requiring Monte Carlo simulation.
An IFRS 2 error rarely stays small. Expense is recognised over a vesting period, so a wrong assumption in year one repeats in every year after it, and the correction lands as a cumulative catch-up rather than a single-period adjustment.
In a listing process the exposure is sharper. Bankers and reporting accountants examine three years of financials, and a plan that was never expensed becomes restated comparatives, an extended timetable and a question about what else was missed.
There is a quieter cost too. Employees hold awards they cannot value, boards approve plans without seeing the accounting charge, and the first time anyone quantifies it is when an auditor does.
IFRS 2 valuation is not a year-end formality. It is the number that tells your board what the equity they are granting actually costs.
Five working days gives you a written view of where your valuation and expense would be challenged. Send the grant schedule and last year's note.
A valuation for every grant, the expense schedule split by period, the journal entries, and the disclosure note drafted ready for the financial statements. Where an award carries a market condition such as a total shareholder return target, the Monte Carlo simulation and its inputs come with it, because that is the part a reviewer asks to see.
A valuation and expense review runs about five working days. A full build with historical restatement typically runs three to six weeks depending on grant volume and record quality.
Grant agreements, plan rules, a schedule of grants by tranche, and leaver history. If awards have been modified, we need the before and after terms. Missing exercise history is normal for unlisted companies and we work around it.
Yes. Our review reads the model, assumptions and expense schedule against IFRS 2 and flags what an auditor is likely to challenge. This is the most common first engagement for teams who inherited a model they cannot explain.
It affects it whenever historical grants were never expensed, because comparatives then have to be restated before reporting accountants sign off. Valuing historical grants and rebuilding the expense schedule typically takes three to six weeks. Starting before diligence keeps it off the critical path.
We value each grant at its grant date using the model the award requires, then spread that fair value over the vesting period, adjusted for the number of awards expected to vest. For equity-settled awards the grant date fair value is fixed and never revisited. The forfeiture estimate is revised each period and the cumulative expense trued up.
Yes, and the difference is significant. Equity-settled awards are measured at grant date fair value and not remeasured. Cash-settled awards are remeasured at fair value at each reporting date until settlement, with the movement going through profit or loss.
The expense stands. Market conditions such as a share price or total shareholder return target are built into the grant date fair value, so failing to meet one does not reverse the charge. Service and non-market performance conditions work the other way: if they are not met, the expense is reversed.
Three things: the nature and extent of the arrangements, how fair value was determined, and the effect on profit or loss and financial position. Auditors focus hardest on how fair value was determined, because that is where the assumptions sit.
Yes. We run both bases from a single grant register and reconcile the differences, which mainly arise on forfeiture policy and graded vesting attribution. Groups with a US parent and a GCC subsidiary usually need both, and the reconciliation is what the group auditor asks for.
Yes. The implementation guidance examples and the Basis for Conclusions are where the edge cases get resolved, including arrangements such as forgivable loans linked to equity. Where an award does not fit a standard pattern, that is the material we work from.
A virtual stock option plan that settles in cash is a cash-settled share-based payment, so it creates a liability remeasured at every reporting date. A real ESOP settled in shares is equity-settled and measured once at grant date. Same economics for the employee, very different accounting.
Yes, if you grant equity or equity-linked awards to employees or suppliers. Being unlisted changes how fair value is estimated, not whether the standard applies. Volatility is built from a comparable listed peer set rather than your own share price history.
Prima delivers IFRS 2 valuation services across Saudi Arabia, the UAE, Pakistan, Ireland and Germany. Local plan design differs, particularly virtual plans in Germany. The measurement rules are the same everywhere.
Share-based payment valuation sits inside a wider IFRS practice. These are the adjacent teams and pages at Prima:
Every grant you have made creates an expense, whether or not anyone has calculated it. The question is whether the number holds when an auditor or a reporting accountant looks at how you got there.
Prima's IFRS 2 share-based payment valuation services start with a five-day review that tells you where your current position would be challenged. You get a written answer before committing to anything.
Request Your Free Expense Review30-minute call. No obligation. Specific to your grants and year end.
Ready to elevate your business with Prima Consulting? Fill out the form below to discuss your needs with our experts and discover how we can help you achieve your business goals.
We Schedule a call at your convenience
We do a discovery and consulting meeting
We prepare a proposal
