Annual Report 2015
FINANCIAL SECTION
127
3 PRINCIPAL ACCOUNTING POLICIES
(continued)
(z) Employee benefits
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(iii) Defined contribution plans
A defined contribution plan is a pension plan under which the Group pays contributions into a separate
entity. The Group has no legal or constructive obligations to pay further contributions if the fund does
not hold sufficient assets to pay all employees the benefits relating to employee service in the current
and prior periods. Contributions to defined contribution plans, including the Mandatory Provident Fund
Scheme and employee pension schemes established by municipal government in The People’s Republic
of China (“PRC”) are expensed as incurred. Contributions are reduced by contributions forfeited by those
employees who leave the schemes prior to vesting fully in the contributions, where applicable.
(iv) Defined benefit plans
Defined benefit plans define an amount of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the consolidated statement of financial position in respect of defined benefit
pension plans is the present value of the defined benefit obligation at the end of the reporting period less
the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries
using the projected unit credit method. The present value of the defined benefit obligation is determined
by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds
that are denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension obligation. In countries where there is no deep market
in such bonds, the market rates on government bonds are used.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the consolidated income statement.
(v) Share-based compensation
The Group operates a number of equity-settled, share-based compensation plans. The fair value of the
employee services received in exchange for the grant of share options is recognised as an expense. The
total amount to be expensed over the vesting period is determined by reference to the fair value of the
options granted at the date of grant, excluding the impact of any non-market vesting conditions. At the
end of each reporting period, the Group revises its estimates of the number of options that are expected
to vest. It recognises the impact of the revision of original estimates, if any, in the consolidated income
statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital when
the options are exercised.
On lapse of share options according to the plan, corresponding amount recognised in employees’ share-
based compensation reserve is transferred to retained profits.
The grant by the Company of options over its equity instruments to the employees of subsidiary
undertakings in the Group is treated as a capital contribution. The fair value of employee services
received, measured by reference to the grant date fair value, is recognised over the vesting period as an
increase to interests in subsidiary undertakings, with a corresponding credit to equity in the parent entity
accounts.
