Does Accounting Treatment of Share-Based Payments Impact Performance Measures for Banks?

Alaa Alhaj Ismail, Sami Adwan, John Stittle

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)
58 Downloads (Pure)


This paper identifies, evaluates, and analyses the resulting impact of mandatory expensing of Share-Based Compensation (SBC) under IFRS2/FASB123R on a set of widely used performance measures in the EU and US banking industry. The paper shows that the accounting treatment of SBC schemes, following the mandatory adoption of IFRS2/FAS123R, has a statistically significant negative impact on the selected performance measures over the period 2004-2011. The impact also seems to be material, yet modest, for US banks and only for large and high growth EU banks, indicating that earlier public concerns and criticisms of the implementation of IFRS2/FAS123R are largely unsubstantiated. The findings also show that banks continue to use SBC, but there is a reduction, albeit insignificant, in the recognised SBC expense over the period 2009-2011. That is, earlier public concerns that firms would curtail employing SBC in their employees’ compensation schemes to avoid the effect of SBC expense recognition on their financial ratios came to light after the first option life-cycle in the post-adoption period was over. The findings also show a marked movement towards using cash-settled based payments, possibly due to their manipulative accounting treatment, a potentially interesting issue for related accounting research and accounting standard-setters.
Original languageEnglish
Pages (from-to)631-648
Number of pages18
JournalAustralian Accounting Review
Issue number4
Early online date5 Jul 2018
Publication statusPublished - Dec 2019

Bibliographical note

This is the peer reviewed version of the following article: Alhaj Ismail, A, Adwan, S & Stittle, J 2018, 'Does Accounting Treatment of Share-Based Payments Impact Performance Measures for Banks?' Australian Accounting Review, vol (in press), pp. (in press), which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.


  • Share-Based Payments
  • IFRS2/FASB123R
  • Cash-Settled Based Payments
  • Banks

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)


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