Lenovo 2016 Annual Report Download - page 182

180 Lenovo Group Limited 2015/16 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(x) 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 (for example, an
entity’s share price); 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 share-based
compensation reserve under equity.
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 for new allotment of shares to employees, or to the employee share trusts for shares
awarded to employees by the employee share trusts.
(iv) Termination benefit
Termination benefits are payable when employment is terminated by the Group before the normal
retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits.
The Group recognises termination benefits at the earlier of the following dates: (a) when the Group
can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a
restructuring that is within the scope of HKAS 37 and involves the payment of termination benefits. In
the case of an offer made to encourage voluntary redundancy, the termination benefits are measured
based on the number of employees expected to accept the offer. Benefits falling due more than 12
months after the end of the reporting period are discounted to their present value.
(v) Share options
The proceeds received net of any directly attributable transaction costs are credited to share capital
when the options are exercised.
(y) Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the
grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognized as “Other operating expenses – net” in
the consolidated income statement over the period necessary to match them with the costs that they are
intended to compensate.
Government grants relating to property, plant and equipment are included in other non-current liabilities as
deferred government grants and are credited to the consolidated income statement on a straight-line basis
over the expected lives of the related assets.