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ACCA Strategic Professional · Strategic Business Reporting (International) · Share-based payment

Gamma Co's finance director asks the financial controller to reduce the number of employees expected to leave when estimating the share-based payment charge, so that profit meets a bonus target linked to earnings. Historical staff turnover supports a higher expectation of leavers. What is the most appropriate response by the financial controller?

The financial controller should refuse to adopt the unsupported estimate, apply the turnover rate backed by historical evidence, and escalate to the audit committee or higher if pressure continues. Estimates must be unbiased and faithful, and ethical duties of integrity and objectivity override a bonus-driven request.

  1. AComply, as estimates are matters of management judgement
  2. BComply but disclose the change in estimate in the notes
  3. CRefuse to use an unsupported estimate, use the evidence-based turnover rate, and escalate if pressure continuesCorrect
  4. DUse the lower turnover and ask the auditors to approve it

Explanation

IFRS 2 requires the best available estimate of awards expected to vest, supported by evidence. Professional accountants must act with integrity and objectivity and not be influenced by bias or undue pressure. The controller should use the supported estimate and escalate through governance channels if necessary.

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