HSBC 2015 Annual Report Download - page 366

Notes on the Financial Statements (continued)
6 – Employee compensation and benefits
HSBC HOLDINGS PLC
364
HSBC share option plans
Main plans Policy Purpose
Savings-related
share option plans
(‘Sharesave’)
• Two plans: the UK Plan and the International Plan. The last
grant of options under the International Plan was in 2012.
• From 2014, eligible employees can save up to £500 per month
with the option to use the savings to acquire shares.
• Exercisable within six months following either the third or fifth
anniversaries of the commencement of a three-year or five-
year contract, respectively.
• The exercise price is set at a 20% (2014: 20%) discount to the
market value immediately preceding the date of invitation.
• To align the interests of employees with
the creation of shareholder value.
HSBC Holdings
Group share
option plan
• Plan ceased in May 2005.
• Exercisable between the third and tenth anniversaries of the
date of grant.
• Long-term incentive plan between 2000
and 2005 during which certain HSBC
employees were awarded share options.
Calculation of fair values
The fair values of share options are calculated using a Black-Scholes model. The fair value of a share award is based on the
share price at the date of the grant.
Movement on HSBC share option plans
Savings-related
share option plans
HSBC Holdings Group
share option plan
Number
(000s)
WAEP1
£
Number
(000s)
WAEP1
£
Outstanding at 1 January 2015 66,366 4.89 6,374 7.29
Granted during the year2 52,629 4.05
–
–
Exercised during the year3 (21,120) 4.45
–
–
Expired during the year (23,100) 5.11 (6,374) 7.29
Outstanding at 31 December 2015 74,775 4.36
–
–
Weighted average remaining contractual life (years) 3.92
–
Outstanding at 1 January 2014 93,760 4.04 55,026 7.23
Granted during the year2 28,689 5.19
–
–
Exercised during the year3 (50,393) 3.48 (1) 7.22
Expired during the year (5,690) 4.81 (48,651) 7.22
Outstanding at 31 December 2014 66,366 4.89 6,374 7.29
Weighted average remaining contractual life (years) 2.66 0.30
1 Weighted average exercise price.
2 The weighted average fair value of options granted during the year was $1.09 (2014: $1.90).
3 The weighted average share price at the date the options were exercised was $8.50 (2014: $9.91) and $0 (2014: $9.49) for the savings-related share
option plans and HSBC Holdings Group share option plan, respectively.
Post-employment benefit plans
Accounting policy
HSBC operates a number of pension and other post-employment benefit plans throughout the world. These plans include both defined
benefit and defined contribution plans and various other post-employment benefits such as post-employment healthcare.
Payments to defined contribution plans and state-managed retirement benefit plans, where HSBC’s obligations under the plans are
equivalent to a defined contribution plan, are charged as an expense as the employees render service.
The defined benefit pension costs and the present value of defined benefit obligations are calculated at the reporting date by the schemes’
actuaries using the projected unit credit method. The net charge to the income statement mainly comprises the service cost and the net
interest on the net defined benefit asset or liability and is presented in operating expenses.
The past service cost, which is charged immediately to the income statement, is the change in the present value of the defined benefit
obligation for employee service in prior periods resulting from a plan amendment (the introduction or withdrawal of, or changes to, a
defined benefit plan) or curtailment (a significant reduction by the entity in the number of employees covered by a plan). A settlement is a
transaction that eliminates all further legal and constructive obligations for part or all of the benefits provided under a defined benefit plan,
other than a payment of benefits to, or on behalf of, employees that is set out in the terms of the plan and included in the actuarial
assumptions.
Re-measurements of the net defined benefit asset or liability, which comprise actuarial gains and losses, return on plan assets (excluding
interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income.