Lenovo 2012 Annual Report Download - page 125

2011/12 Annual Report Lenovo Group Limited 123
2 Significant accounting policies (continued)
(w) Employee benefits (continued)
(iii) Long-term incentive program
The Group operates a long-term incentive program to recognize employees’ individual and collective contributions,
andincludestwotypesofawards,namelyshareappreciationrightsandrestrictedshareunits(“Long-term
IncentiveAwards”).TheCompanyreservestheright,atitsdiscretion,topaytheawardincashorordinaryshares
of the Company. The fair value of the employee services received in exchange for the grant of the Long-term
Incentive Awards is recognized as employee benefit expense. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the Long-term Incentive Awards granted, including any market
performance conditions; excluding the impact of any service and non-market performance vesting conditions (for
example, profitability and sales growth targets); and including the impact of non-vesting conditions. Non-market
performance and service conditions are included in assumptions about the number of Long-term Incentive Awards
that are expected to become exercisable/vested. The total expense is recognized over the vesting period, which is
the period over which all of the specified vesting conditions are to be satisfied.
At each balance sheet date, the Group revises its estimates of the number of Long-term Incentive Awards that are
expected to become exercisable. It recognizes the impact of the revision of original estimates, if any, in the income
statement, with a corresponding adjustment to other comprehensive income.
Employee share trusts are established for the purposes of awarding shares to eligible employees under the
long-term incentive program. The employee share trusts are administered by independent trustees and are funded
by the Group’s cash contributions and recorded as contributions to employee share trusts, an equity component.
The administrator of the employee share trusts buys the Company’s shares in the open market for award to
employees upon vesting.
Upon vesting, the corresponding amounts in the share-based compensation reserve will be transferred to share
capital (nominal value) and share premium for new allotment of shares to employees, or to the employee share
trusts for shares awarded to employees by the employee share trusts.
(iv) Share options
In accordance with the transitional provision of HKFRS 2, share options granted after November 7, 2002 and were
unvested on April 1, 2005 was expensed retrospectively in the income statement of the respective periods. At
April 1, 2005, the Group had no option granted after November 7, 2002 that had not yet vested on that day. 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.
(x) Operating leases (as the lessee)
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are
accounted for as operating leases. Payments made under operating leases (net of any incentives received from the
lessor) are charged to the income statement on a straight-line basis over the lease term.
(y) Related party transactions
A related party transaction is a transfer of resources, services or obligations between the Group and a related party of
the Group, regardless of whether a price is charged.
(i) A person, or a close member of that person’s family, is related to the Group if that person:
– has control or joint control over the Group;
– has significant influence over the Group; or
– is a member of the key management personnel of the Group or the Group’s parent.