1. Advantages and disadvantages of companies practicing share-based payment.

Advantages of companies practicing share-based payment

 Can help solve problem or conflict between shareholder and management or

other employees as an agent.(booklet ifrs 2018)

Based on Principal Agent Theory, focus on how to solve the conflict between

shareholder as principals and management as an agents which is agents also need

to pursue their own interests not only interest of the shareholders. Therefore, the

remuneration package are given to employees as share based payment. The

employees provide whether one or more services which is a condition that given the

employees the share based payment. This will motivate the employees to make an

effort to achieve the business target from the benefit of share based payment.

 Various choice of settlement of employees transactions(booklet ifrs 2018)(vinod

sbp)

The method of settlement is irrelevant for achieving this alignment of interests

because share-based payments, whether made in cash or equity instruments and

based on the value of those instruments, have the same motivating impact. An entity

normally issued two types settlement which are equity settled transaction and cash

settled transaction. Equity settled transaction is an entity receives goods or services

that considered as equity instruments. Normally issued to the employees which

commonly a grant date, a vesting date and an exercise date. An employee must

typically reach a specified period after the grant date in order to be eligible for the

equity instrument, or before the vesting date. The cash settled transaction which
 there will create a liability if the entity acquired a good or services, if the goods or

services have been acquired, it would lead to creation of a financial liability rather

than equity instrument.

Disadvantages of companies practicing share-based payment

 Agreement need to include important consideration to prevent any unforeseen

outcomes.

Based on the agreement, which a deal when entity receive the goods or services

either as consideration for its equity instruments or by incurring liabilities for amounts

based on the price of the entity’s shares or other equity instruments of the entity. All

the important data need to be in the agreement in order to prevent conflicts between

two parties.

 Decrease in Earning Per Share

When share options are issued to employees, potential claims on

equity are given to employees with the result that existing shareholders’ interests

may be diluted (Aboody et al., 2003). Existing shareholders of listed companies are

concerned about the possible dilution of their ownership, as well as the possible

dilutive effect on earnings per share (EPS) (Leahey and Zimmermann, 2007).

Reduction of basic earning that are use in calculation earning per share when

recognition of share based payment expenses.

2. Discuss the potential impact(s) of the share-based payment disclosure to

potential shareholders.

The potential impacts of share based payment disclosure to potential

shareholder is an increase of equity instruments if it’s equity settlement transaction

and an increase in liability of cash settlement transaction if an entity obtained goods

or services. In addition, if there’s a recognition of share based payment in financial

reports, where the shareholders will be able to see if an entity can control their

management which gives shareholders to decide whether to invest or not in the

entity. Then, a reduction in earning per share will effect to the stock option where will

effect to the new and existing shareholders interest. This will effect directly to the

shareholders rather than the company for an investment.

3. Reflective

The reflective of this project is a new knowledge about share based payment on how

it work in an entity and whether it can effect external users or not. Then, i can learn

on elaborate whether share-based payment and provisions, contingent liabilities and

contingent assets influence the financial performance and financial position of the

two companies that are chooses. In addition, my groupmate and i can gain an

experience about the share based payment that are practiced in the company of

Berjaya Food Berhad and Bonia Corporation Berhad.

4. References

https://www.google.com/url?sa=t&source=web&rct=j&url=https://

repository.up.ac.za/bitstream/handle/2263/40321/Pretorius_Effect_2013.pdf

%3Fsequence%3D1%26isAllowed%3Dy%23:~:text%3DThe%2520effect

%2520of%2520expensing%2520SBP,is%2520used%2520in%2520calculating

%2520BEPS.&ved=2ahUKEwii0Jz1lOb-

AhXta2wGHXMJBE4QFnoECBoQBQ&usg=AOvVaw2FbzgQ0jBhQ9He7dxWi3Y

https://corporatefinanceinstitute.com/resources/accounting/share-stock-based-

compensation/

https://www.researchgate.net/publication/

46510747_The_Impact_of_IFRS_2_Share-

Based_Payment_on_Malaysian_Companies
Corporate Finance Institute. (2022). Stock Based Compensation. Corporate

Finance Institute.

https://corporatefinanceinstitute.com/resources/accounting/share-stock-based-

compensation/

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, 13(03), 449–468.

https://doi.org/10.1142/s0219091510002025

IFRS 2: Share-based payment transactions – Vinod Kothari Consultants. (n.d.).

https://vinodkothari.com/ifrs_2/#:~:text=Share%2Dbased%20payment

%20transactions%20are,%2C%20shares%20or%20share%20options).

ACCA - https://www.accaglobal.com. (n.d.). Share-based payment | DipIFR |

Students | ACCA | ACCA Global.

https://www.accaglobal.com/gb/en/student/exam-support-resources/dipifr-study-

resources/technical-articles/shared-based-payment.html