SAP to Treat Share-Based Compensation as Regular Expense

By Mauro Orru

SAP will start considering share-based compensation as a regular expense in the new year, part of changes to the software company's financial reporting practices it said were aimed at increasing the transparency of its operating results.

The Walldorf, Germany-based group said Monday that it would include share-based compensation expenses in its non-IFRS results starting Jan. 1, meaning the move will initially affect SAP's first-quarter results to be reported on April 22. SAP's 2023 results won't reflect the change, but guidance for the new year--expected to come Jan. 24--will factor in the new accounting, which could also feed into potential updates of its 2025 targets.

"Including share-based compensation in our adjusted earnings may be interpreted as a disadvantage in comparison with some of our peers," said Chief Financial Officer Dominik Asam. "But we believe recognizing share-based compensation as a genuine expense of running a business is long overdue."

SAP, like other European software companies, presents its figures as two sets of numbers. One based on the International Financial Reporting Standards--an accounting method that seeks to provide a global reporting standard--though analysts and investors tend to follow SAP's non-IFRS numbers, which have so far excluded share-based compensation, restructuring expenses and acquisition-related charges.

Among other changes that will take effect in the new year, SAP said it would be excluding gains or losses from equity investments from its non-IFRS results, while gains or losses from small divestments will be recognized as non-operating income or expenses.

"By implementing these updates, we hope to further increase the transparency of our operating results, while at the same time reducing short-term noise and volatility," Asam said.

Write to Mauro Orru at [e-mail]

(END) Dow Jones Newswires

December 18, 2023 12:19 ET (17:19 GMT)

Copyright (c) 2023 Dow Jones & Company, Inc.