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Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
148
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(t) Employee benefits (continued)
(iv) Share-based compensation
The Group operates a number of equity-settled and cash-settled share-based compensation plans by the Company and certain subsidiaries
under which the entity receives services from employees as consideration for equity instruments (options) of the Group/certain subsidiaries.
The fair value of the options granted in exchange for the services of the employees are recognised as employee benefit expense with a
corresponding increase to share option reserve within equity. The total amount to be expensed is determined by reference to the fair value
of the options granted:
- including any market performance conditions;
- excluding the impact of any service and non-market performance vesting conditions; and
- excluding the impact of any non-vesting conditions.
Non-market vesting conditions and service conditions are included in assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to
be satisfied. At the end of the reporting period, the Group and the Company revise its estimates of the number of options that are
expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding adjustment to share option reserve in equity.
When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share premium when the options are exercised. When options are not exercised
and lapsed, the share option reserve is transferred to retained earnings.
In its separate financial statements of the Company, the grant by the Company of options over its equity instruments to the employees
of subsidiaries in the Group is treated as services provided to the subsidiaries. The fair value of options granted to employees of the
subsidiaries in exchange for the services of the employees to the subsidiaries are recognised as payables from subsidiaries, with a
corresponding credit to equity of the Company.
(v) Post-employment benefit obligations
The Group operates various defined benefit plans in accordance with local conditions and practices in the countries in which it operates.
The plans are generally funded through payments to insurance companies or trustee-administrated funds, determined by periodic
actuarial calculations. A defined benefit plan is a pension plan that is not a defined contribution plan. 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 Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity
such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the
end of the reporting period. The liability recognised in the statement of financial position in respect of defined benefit pension plans is
the present value of the defined obligation at the end of the reporting period less the fair value of plan assets, together with adjustments
for actuarial gains/losses and unrecognised past-service costs.
The defined benefit obligation is calculated annually by independent actuaries using projected unit credit method. The present value of
the defined benefit obligation is determined by discounting the estimated future cash flows 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 approximately to the
terms of related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds
are used.
Remeasurement, comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, are
charged or credited to equity in OCI in the period in which they arise and will not be reclassified to profit or loss.
Past-service costs are recognised immediately in profit or loss.