LensCrafters 2013 Annual Report Download - page 107

recognized if they arise from the initial recognition of goodwill. Deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted as of the balance sheet date and are expected to apply when the
related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets
are recognized only to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilized. Deferred income tax is provided on temporary differences arising on investments
in subsidiaries and associates, except for deferred tax liabilities where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable
future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied
by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention
to settle the balances on a net basis.
Employee benefits
The Group has both defined benefit and defined contribution plans.
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans
define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more
factors such as age, years of service and compensation. The liability recognized 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, together with adjustments for unrecognized past-service
costs. 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 the terms of the related pension obligation.
Actuarial gains and losses due to changes in actuarial assumptions or to changes in the plan’s conditions are
recognized as incurred in the consolidated statement of comprehensive income.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognized as employee benefits expenses when they are due.
Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is
available.
Provisions for risks
Provisions for risks are recognized when:
• the Group has a present obligation, legal or constructive, as a result of a past event;
• it is probable that the outflow of resources will be required; and
• the amount of the obligation can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation
using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
obligation. The increase in the provision due to passage of time is recognized as interest expense. Risks that are possible
are disclosed in the notes. Risks that are remote are not disclosed or provided for.
Share-based payments
The Company operates a number of equity-settled, share-based compensation plans, under which the entity
receives services from employees as consideration for equity instruments (options). The fair value of the employee
services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed
is determined by reference to the fair value of the options granted.