Annual Report for the year ended 31 December 2008

(b) Share-based plans
The Group’s management awards high-performing employees bonuses in
the form of equity-settled share based payments, from time to time, on a
discretionary basis. in accordance with iFrs 2, ‘share-based payments’,
equity-settled share-based payments are measured at fair value at the date
of grant. Fair value is measured by use of the Black-scholes pricing model
or, in the case of awards of call rights, which have an exercise price of 1p
per ordinary share the fair value is based on the market value at the time of
grant discounted by the dividend yield over the expected life. The fair value
determined at the grant date of the equity-settled share-based payments
is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of the number of shares that will eventually vest. The
options are generally subject to three-year service vesting condition, and
their fair value is recognised as an employee benefits expense with a
corresponding increase in other reserve equity over the vesting period.
The proceeds received net of any directly attributable transaction costs
are credited to share capital (nominal value) and share premium when
the options are exercised.
(c) Employees’ Share Ownership Plan (“ESOP”)
The esop allows every employee to purchase up to £1,500 worth of the
Group’s shares per annum on a tax efficient basis. These are purchased on
a monthly basis and held in trust and are matched by shares issued by the
Group company on a one-for-one basis.
Current and deferred income taxes
current income taxes are computed on a basis of the tax laws enacted or
substantially enacted at the Balance sheet date in the countries where the
Group’s subsidiaries operate and generate income.
Taxes are computed using the liability method, deferred income on
temporary differences between the bases of assets and liabilities and their
carrying amounts in Financial statements. The 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 nor loss.
Deferred income tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which tax losses or
deductible temporary differences can be utilised. such assets and liabilities
are not recognised if the temporary difference arises from goodwill, negative
goodwill or from the acquisition of an asset, which does not affect either
taxable or accounting income.
Deferred income tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where the Group
is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred income tax is charged or credited in the income statement, except
when it relates to items charged or credited directly to equity, in which case
the deferred tax is also dealt with in equity.
notes to tHe FinanCial statements CONTINuED
FOR THE YEAR ENDED 31 DECEMBER 2008
The Group is entitled to a tax deduction for amounts treated as compensation
on exercise of certain employee share options under uK tax rules. As explained
under “share-based plans” above, a compensation expense is recorded in
the Group’s income statement over the period from the grant date to the
vesting date of the relevant options. As there is a temporary difference between
the accounting and tax bases, a deferred tax asset is recorded. The deferred
tax asset arising is calculated by comparing the estimated amount of tax
deduction to be obtained in the future (based on the company’s share price
at the Balance sheet date) with the cumulative amount of the compensation
expense recorded in the income statement. if the amount of estimated
future tax deduction exceeds the cumulative amount of the remuneration
expense, at the statutory tax rate, the excess is recorded directly in equity,
against retained earnings.
in accordance with the provisions of iFrs 2, no compensation charge is
recorded in respect of options granted before 7 november 2002 or in
respect of those options which have been exercised or have lapsed before
1 January 2005. nevertheless, tax deductions have arisen and will continue
to arise on these options. The tax effects arising in relation to these options
are recorded directly in equity, against retained earnings.
Share capital
a) Share issue costs
ordinary shares are classified as equity.
incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction from the proceeds, net of tax.
b) Treasury shares
Where the Group purchases its own equity share capital (treasury shares),
the consideration paid, including any directly attributable incremental costs
(net of taxes), is deducted from equity attributable to the company’s equity
holders until the shares are cancelled, reissued or disposed of.
c) Trust shares
The Group’s employee Benefit Trust (“the Trust”) uses funds provided by
the Group to meet the Group’s obligations under the employee share option
schemes in place. All shares acquired by the Trust are purchased on the
open market. The consideration paid, including any directly attributable
incremental costs (net of taxes), is deducted from equity attributable to
the company’s equity holders.
d) Dividend distribution
Dividend distribution to the Group’s shareholders is recognised in equity in
the Group’s Financial statements in the period in which the dividends are
paid. Final dividends are recognised at the date they are approved by
shareholders at the Annual General Meeting.
Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares
in issue during the period, excluding those held in the evolution Group plc
employees’ share Trust which are treated as cancelled. For diluted earnings
per share, the weighted number of ordinary shares in issue is adjusted to
assume conversion of all dilutive potential ordinary shares and option costs
not yet charged to the income statement.
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