BIM44180 - Specific deductions: Employee share schemes: generally accepted accounting practice: UITF17

UITF17 is effective from 22 June 1997. It applies:

on its own where a company issues new shares direct to employees to satisfy share option exercises, rather than using an employee share ownership trust, or
in conjunction with UITF13 where an employee share ownership trust is used to hold existing or newly issued shares to transfer to employees when they exercise their share options or when share awards vest.

The key features of UITF17 are:

the fair value of the shares at the date of the award (or the book value of the shares if they are held in an ESOP trust), LESS
any consideration receivable from the employee (for example the option exercise price);

the cost is recognised in the profit and loss account over the period to which the option or award relates, usually on a straight line basis, either in one year if it is an annual award or over any longer performance period to which the option or award relates;
the amount charged to the profit and loss account is adjusted year on year to reflect changing assumptions (for example about the likelihood of performance conditions being satisfied, options being exercised or lapsing);
the same treatment applies to share options granted with an exercise price which is less than the market value of the shares at the date the option was granted (commonly known as "discounted options");
UITF17 is not mandatory for HMRC approved SAYE share option schemes or overseas equivalent schemes;
Where new shares are issued, the credit (to match the charge in the profit and loss account) should be shown as a reconciliation of movements on shareholders funds.