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In the second of a two-part article, Guy Mulley, head of NW Brown Employee Benefits, explores some more issues which GEIF investors might encounter where employee share incentives are involved. In the first article we looked at some initial issues which might be relevant to early-stage investors. This second article looks at some medium-term issues which might affect investors.

Accounting Effect
A new concern for investors is the effect of a share scheme on the company's figures. The accounting world is moving towards a greater recognition in the current profit & loss account of the future share benefits accruing to employees. Two consequences immediately spring to mind. Firstly, the new accounting treatment could mean that the company does not make the profit you think it has. Secondly, there could be volatility over a number of years, giving a misleading appearance about the company's progress. Such consequences could, at least, confuse future investors and, at worst, could drive them away. That would be a major concern for GEIF and other early-stage investors. A share scheme problem like that could mean a share price halved.

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