Vision - Alibaba

104 Annual Report 2007
Notes to the Financial Statements
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.13 Staff costs (Continued)
(c) Share-based compensation (Continued)
Share appreciation rights
Share-based compensation expense related to share appreciation rights granted by the Group
to its employees is measured as the amount by which the fair market value, with reference to
the quoted market price, of the Company’s shares exceeds the exercise price. The expense
is amortized to the income statement over the respective vesting period during which the
employees become unconditionally entitled to the share appreciation rights. The liability of such
accrued expense associated with cash-settled share appreciation rights is re-measured to fair
value at each balance sheet date with the effect of changes in the fair value of the liability being
charged or credited to the income statement.
2.14 Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of
past events, it is probable that an outfl ow of resources will be required to settle the obligation and, the
amount can be reliably estimated.
Where there are a number of similar obligations, the likelihood that an outfl ow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognized
even if the likelihood of an outfl ow with respect to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation. The increase in the provision due to passage of time is recognized as interest expense.
2.15 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the provision of
services in the ordinary course of the Group’s activities.
The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefi ts will fl ow to the entity and specifi c criteria have been met for each of
the Group’s activities as described below. The amount of revenue is not considered to be reliably
measurable until all contingencies relating to the sale have been resolved.
The Group principally derives its revenue from the provision of B2B services.