European Financial and Accounting Journal 2017, 12(3):53-64 | DOI: 10.18267/j.efaj.187

Fulfillment of IFRS 2 Disclosure Requirements by Companies Listed on the Prague Stock Exchange

Martin Červený
University of Economics Prague, Faculty of Finance and Accounting, Department of Corporate Finance, W. Churchill Sq. 4, 130 67 Prague, Czech Republic.

The aim of this paper is to assess the quality of share-based payments' disclosure in compliance with IFRS 2 by companies listed on the Prague Stock Exchange. The study shows how companies in the Czech market utilizing share-based payments meet the requirements given by IFRS 2 framework and in order to support the arguments, it compares the results with randomly selected companies from the German DAX index, which represents a well-developed market. The focus is on three key principles of disclosure, as defined by the IFRS 2. As we will demonstrate, Czech corporations do meet the regulatory minimum requirements, but they fail to utilize some of the advanced valuation methods and their reports are generally rather brief compared to their German counterparts.

Keywords: IFRS 2, Share-Based Payments, Employee Stock Options
JEL classification: M40

Published: December 11, 2018  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Červený, M. (2017). Fulfillment of IFRS 2 Disclosure Requirements by Companies Listed on the Prague Stock Exchange. European Financial and Accounting Journal12(3), 53-64. doi: 10.18267/j.efaj.187
Download citation

References

  1. Amman, M., Seiz, R., 2005. An IFRS 2 and FASB 123 (R) compatible model for the valuation of employee stock options. Swiss Society for Financial Market Research 4, 381-396. DOI: 10.1007/s11408-005-6458-2. Go to original source...
  2. Atan, R., Jasni N. S., Shahwan, Y., 2010. The Impact of IFRS 2 "Share-Based Payment" on Malaysian Companies. Review of Pacific Basin Financial Markets and Policies 3, 449-468. DOI: 10.1142/s0219091510002025. Go to original source...
  3. Bebchuk, L. A., Fried, J. M., Walker, D. I., 2002. Managerial power and rent extraction in the design of executive compensation. National bureau of economic research 69, 751-846. DOI: 10.3386/w9068. Go to original source...
  4. Bodie, Z., Kaplan, R. S., Merton, R. C., 2003. For the Last Time: Stock Options Are an Expense. Harvard Business Review 3, 63-71. DOI: 10.2469/dig.v33.n3.1327. Go to original source...
  5. Chalmers, K., Godfrey, J. M., 2005. Expensing stock-based payments: A material concern? Journal of International Accounting, Auditing and Taxation 2, 157-173. DOI: 10.1016/j.intaccaudtax.2005.08.004. Go to original source...
  6. Chebotareva, N., 2015. IFRS 2 Share-Based Payment research project: Report on research. IASB Agenda. Available from: [14 January 2017].
  7. Core, J., Guay, W., 1999. The use of equity grants to manage optimal equity incentive levels. Journal of Accounting and Economics 2, 151-184. DOI: 10.1016/s0165-4101(99)00019-1. Go to original source...
  8. Czech National Bank (ČNB), 2016. Mandatory Data Published by Public Companies. Prague, Czech Republic. Available from: [26 December 2016].
  9. Demsetz, H., Lehn, K., 1985. The structure of corporate ownership: Causes and consequences. The Journal of Political Economy 6, 1155-1177. DOI: 10.1086/261354. Go to original source...
  10. Giner, B., Arce, M., 2012. Lobbying on Accounting Standards: Evidence from IFRS 2 on Share-Based Payments. European Accounting Review 4. 655-691. DOI: 10.1080/09638180.2012.701796. Go to original source...
  11. Healy, P. M., Palepu, K. G., 2003. The fall of Enron. Journal of Economic Perspectives 2, 3-26. DOI: 10.1257/089533003765888403. Go to original source...
  12. Himmelberg, C. P., Hubbard, R. G., Palia, D., 1999. Understanding the determinants of managerial ownership and the link between ownership and performance. Journal of Financial Economics 3, 353-384. DOI: 10.1016/s0304-405x(99)00025-2. Go to original source...
  13. Horton, J., Serafeim, G., 2010. Market reaction to and valuation of IFRS reconciliation adjustments: first evidence from the UK. Review of Accounting Studies 4, 725-751. DOI: 10.1007/s11142-009-9108-5. Go to original source...
  14. Hull, J., White, A., 2002. Accounting for Employee Stock Options: A Practical Approach to Handling the Valuation Issues. Journal of Derivatives Accounting 1, 3-9. DOI: 10.1142/s0219868104000026. Go to original source...
  15. Jensen, M. C., Meckling, W. H., 1976. Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics 4, 305-360. DOI: 10.1016/0304-405x(76)90026-x. Go to original source...
  16. Melis, A., Carta, S., 2009. Does accounting regulation enhance corporate governance? Evidence from the disclosure of share-based remuneration. Journal of Management & Governance 4, 435-446. DOI: 10.1007/s10997-009-9107-8. Go to original source...
  17. Nyberg, A. J., Fulmer, I. S., Gerhart, B., Carpenter, M. A., 2010. Agency theory revisited: CEO return and shareholder interest alignment. Academy of Management Journal 5, 1029-1049. DOI: 10.5465/amj.2010.54533188. Go to original source...
  18. Pendleton, A., Robinson, A., 2010. Employee stock ownership, involvement, and productivity: An interaction-based approach. Industrial & Labor Relations Review 1, 3-29. DOI: 10.1177/001979391006400101. Go to original source...
  19. Prague Stock Exchange (PSE), 2017. Market data. Available from: [17 January 2017].
  20. Rajgopal, S., Shevlin, T., 2002. Empirical evidence on the relation between stock option compensation and risk taking. Journal of Accounting and Economics 2, 145-171. DOI: 10.1016/s0165-4101(02)00042-3. Go to original source...

This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.