FRS 20 requires UK companies to recognise share-based payments to employees, directors or suppliers of services, in their financial statements.

The reporting standard was issued in April 2004 and for companies quoted on the London Stock Exchange it came into effect for accounting periods beginning on or after 1 January 2005.

Companies that are unlisted or listed on AIM or OFEX were not required to apply the reporting standard until accounting periods beginning on or after 1 January 2006.

FRS 20 applies when a company purchases products or services (whether from employees or not) in consideration for which they provide an option over their shares or actually issue shares.   The rules of the standard require that

  1. the fair value of the share-based payment must be ascertained as at the time it is awarded
  2. this fair value is then expensed to the accounts over the period in which the products or services are consumed and
  3. relevant supporting notes are provided in the accounts

The equivalent International standard is IFRS 2.