SWEDEN - The Third Swedish National Pension Fund (AP3), one of four buffer funds in the public Swedish pension system, has criticised the proposed international accounting standard for stock options as “too complex” and the disclosure requirements as “too extensive”.

Tomas Nicolin, chief executive officer of AP3, has written to Sir David Tweedie, chairman of the International Accounting Standards Board (IASB) setting out the fund’s objections.

The IASB decided to develop a draft accounting standard (an International Financial Reporting Standard, or IFRS) on share based payment transactions last year to sort out the problem of accounting for stock option costs on the profit and loss account.

The draft, issued in November, proposes that all entities should be required to recognise an expense, measured at fair value, whenever a share-based payment is made

AP3 uses a system of share-based payments in exchange for employee services and management remuneration. It agrees that with the IASB that payments, granted at less than fair value, should be recorded as an expense in the financial statements.

However, it believes that the proposed standard is too complex and the disclosure requirements too extensive.

Nicolin said public opinion was highly sensitive to the issue of management remuneration. “To improve transparency and credibility, it is of vital importance to avoid overly complex accounting practices in this area.

“There is no reason why the calculation of the cost for equity-settled share-based transactions should be any more complex or handled in any greater detail as, for example, depreciation of fixed assets. We are also concerned that too much complexity will lead to poor applications.

“Our preference for principles that are easy to use and understand also leads us to prefer straight-line depreciation of fixed assets. Not because it is a superior method, but simply because the method is easier to use than other, more accurate, methods.”

The IASB said it had received 200 submissions on the proposed standard, and would review them at its meeting on 30 April. The IASB’s current timetable envisages a final standard being issued towards the end of 2003 and coming into effect from 1 January 2004.