Creative 2010 Annual Report Download - page 31

31
CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
2.17 Operating leases
Leases where substantially all risks and rewards incidental to ownership are retained by the lessors are classied as operating
leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in prot
or loss on a straight-line basis over the period of the lease. When a lease is terminated before the lease period expires,
any payment made (or received) by the Group as penalty is recognised as an expense (or income) when termination takes
place.
2.18 Employee compensation
Employee benets are recognised as an expense, unless the cost qualies to be capitalised as an asset.
 (a) Denedcontributionplans
Dened contribution plans are post-employment benet plans under which the Group pays xed contributions into separate
entities such as the Central Provident Fund or Pension on a mandatory, contractual or voluntary basis. The Group has no
further payment obligations once the contributions have been paid.
(b) Share-based compensation
Share options
The share options plan is an equity-settled, share-based compensation plan. The fair value of the employee services
received in exchange for the grant of options is recognised as an expense in prot or loss with a corresponding increase in
share-based compensation reserves over the vesting period. The total amount to be recognised over the vesting period is
determined by reference to the fair value of the options granted on the date of the grant. Non-market vesting conditions
are included in the estimation of the number of shares under options that are expected to become exercisable on the vesting
date. At each balance sheet date, the Group revises its estimates of the number of shares under options that are expected
to become exercisable on the vesting date and recognises the impact of the revision of the estimates in prot or loss, with
a corresponding adjustment to share-based compensation reserves over the remaining vesting period.
When the options are exercised, the proceeds received (net of transaction costs) and the related balance previously recognised
in other reserves are credited to share capital account when new ordinary shares are issued, or to the “treasury shares”
account when treasury shares are re-issued to the employees.
Performance shares
The performance share plan contemplates the award of fully-paid ordinary shares, their equivalent cash value or combinations
thereof, free of charge, provided that certain prescribed performance targets are met and/or upon expiry of the prescribed
vesting periods.
The fair value of employee services received in exchange for the grant of the awards is recognised as a share-based
compensation expense in prot or loss with a corresponding increase in the share-based compensation reserves over the
vesting period. The amount is determined by reference to the fair value of the performance shares on the grant date.
If the performance target is a market condition, the probability of the performance target being met is taken into account
in estimating the fair value of the ordinary shares granted at the grant date. The compensation expense is charged to prot
or loss on a basis that fairly reects the manner in which the benets will accrue to the employee under the plan over the
prescribed vesting periods from date of grant. No adjustments to the amounts charged to prot or loss are made whether or
not the market condition is met.
For performance share grants with non-market conditions, the Company revises its estimates of the number of share grants
expected to vest and corresponding adjustments are made to prot or loss and share-based compensation reserves.