SAP, the leading software company based in Walldorf, Germany, has announced changes to its financial reporting practices aimed at enhancing transparency in its operating results. Starting from January 1st, SAP will include share-based compensation expenses in its non-IFRS (International Financial Reporting Standards) results, which will impact the company's first-quarter results to be reported on April 22nd. Although the change will not affect SAP's 2023 results, it will be considered in the guidance for the new year, expected to be released on January 24th.
Chief Financial Officer Dominik Asam emphasized the importance of recognizing share-based compensation as a genuine expense in running a business. Despite potentially being viewed as a disadvantage compared to some peers, SAP believes that this accounting adjustment is long overdue.
European software companies typically present their figures in two sets: one based on the International Financial Reporting Standards and another non-IFRS set that excludes certain expenses like share-based compensation, restructuring costs, and acquisition-related charges. SAP's non-IFRS numbers have been closely followed by analysts and investors.
In addition to including share-based compensation as a regular expense, SAP will also exclude gains or losses from equity investments from its non-IFRS results. Gains or losses from small divestments will be recognized as non-operating income or expenses.
These updates are expected to further increase transparency in SAP's operating results while reducing short-term noise and volatility, according to CFO Dominik Asam.
By Mauro Orru
