Vtech 2013 Annual Report Download - page 53

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VTech Holdings Ltd Annual Report 2013
During the vesting period, the number of share options that is
expected to vest is reviewed. Any adjustment to the
cumulative fair value recognised in prior years is charged/
credited to the consolidated income statement for the year of
the review, unless the original employee expenses qualify for
recognition as an asset, with a corresponding adjustment to
the capital reserve. On vesting date, the amount recognised as
an expense is adjusted to reflect the actual number of share
options that vest (with a corresponding adjustment to the
capital reserve) except where forfeiture is only due to not
achieving vesting conditions that relate to the market price of
the Company’s shares. The equity amount is recognised in the
capital reserve until either the option is exercised (when it is
transferred to the share premium account) or the option
expires (when it is released directly to revenue reserve).
At the end of balance sheet date, the Group revises its
estimates of the number of shares of the Company granted
under the Share Purchase Scheme (“Awarded Shares”) that are
expected to ultimately vest. Any resulting adjustment to the
cumulative fair value recognised in prior years is charged/
credited to employee share-based compensation expense
in the current year, with a corresponding adjustment to
capital reserve.
T Share held for Share Purchase Scheme
Where the VTech Share Purchase Scheme Trust purchases shares of
the Company from the market, the consideration paid, including
any directly attributable incremental costs, is presented as Shares
held for Share Purchase Scheme and deducted from total equity.
Upon vesting, the related costs of the vested Awarded Shares
recognised as employee share-based compensation expenses are
credited to Shares held for Share Purchase Scheme, and decrease
in revenue reserve for shares purchased through reinvesting
dividends received on the vested Awarded Shares.
For vesting of forfeited or unallocated shares regranted, the related
costs of the forfeited or unallocated shares regranted are credited
to Shares held for Share Purchase Scheme, and the related fair
value of the shares regranted are debited to capital reserve. The
difference between the cost and the fair value of the shares
regranted is credited to share premium if the fair value is higher
than the cost or debited against revenue reserve if the fair value is
less than the cost.
U Derivative Financial Instruments
Derivative financial instruments are recognised initially at fair value.
At each balance sheet date the fair value is remeasured. The gain
or loss on remeasurement to fair value is recognised immediately
in profit or loss, except where the derivatives qualify for cash flow
hedge accounting or hedge the net investment in a foreign
operation, in which case recognition of any resultant gain or loss
depends on the nature of the item being hedged.
Principal Accounting Policies (Continued)
R Income Tax (Continued)
Additional income taxes that arise from the distribution of
dividends are recognised when the liability to pay the related
dividends is recognised.
Current tax balances and deferred tax balances, and movements
therein, are presented separately from each other and are not
offset. Current tax assets are offset against current tax liabilities, and
deferred tax assets against deferred tax liabilities if, and only if, the
Group has the legally enforceable right to set off current tax assets
against current tax liabilities.
S Employee Benefits
The Group operates a number of defined contribution retirement
schemes throughout the world, including Hong Kong, and a
defined benefit retirement scheme in Hong Kong. The assets of
all schemes are held separately from those of the Company and
its subsidiaries.
(i) Defined contribution schemes
Contributions to the defined contribution schemes are at
various funding rates that are in accordance with the local
practice and regulations. Contributions relating to the defined
contribution schemes are charged to profit or loss as incurred.
(ii) Defined benefit schemes
For long-term employee benefits, the Group’s net obligations
arising under the defined benefit scheme are assessed and
calculated by a qualified actuary using the projected unit
credit method. Under this method, the cost of providing
pensions is charged to profit or loss so as to spread the regular
cost over the service lives of employees in accordance with
the advice of qualified actuaries who carry out a full valuation
of the plan every year. Plan assets are measured at fair value.
Pension obligations are measured as the present value of the
estimated future cash flows of benefits derived from employee
past service, with reference to market yields on high quality
corporate bonds which have terms to maturity approximating
the terms of the related liability. When the benefits of a plan
are improved, the portion of the increased benefit relating to
past service by employees is recognised as an expense in
profit or loss on a straight-line basis over the average period
until the benefits become vested. If the benefits vest
immediately, the expense is recognised immediately in profit
or loss.
(iii) Equity and equity related compensation benefits
For share options granted under the 2001 Scheme and 2011
Scheme, the fair value of share options granted to employees
is recognised as an employee cost with a corresponding
increase in a capital reserve within equity. The fair value is
measured at grant date using the Black-Scholes option pricing
model, taking into account the terms and conditions upon
which the options were granted. Where the employees have
to meet vesting conditions before becoming unconditionally
entitled to the share options, the total estimated fair value of
the share option is spread over the vesting period, taking into
account the probability that the options will vest.