Telkom AR front.qxp

2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Employee benefits (continued)
Defined benefit plans (continued)
The amount recognised in the balance sheet represents the present
value of the defined benefit obligations, calculated by using the
projected unit credit method, as adjusted for unrecognised
actuarial gains and losses, unrecognised past service costs and
reduced by the fair value of the related plan assets. The amount
of any surplus recognised and reflected as deferred expenses is
limited to unrecognised actuarial losses and past service costs plus
the present value of available refunds and reductions in future
contributions to the plan. To the extent that there is uncertainty as
to the entitlement to the surplus, no asset is recognised. No gain
is recognised solely as a result of an actuarial loss or past service
cost in the current period and no loss is recognised solely as a
result of an actuarial gain or past service cost in the current period.
Actuarial gains and losses are recognised as employee
expenses when the cumulative unrecognised gains and losses
for each individual plan exceed 10% of the greater of the
present value of the Group’s obligation and the fair value of
plan assets at the beginning of the year. These gains or losses
are amortised on a straight-line basis over 10 years for all the
defined benefit plans, except gains or losses related to the
pensioners in the Telkom Retirement Fund or unless the standard
requires faster recognition. For the Telkom Retirement Fund
pensioners, the cumulative unrecognised actuarial gains and
losses in excess of the 10% corridor at the beginning of the year
are recognised immediately.
Past service costs are recognised immediately to the extent that
the benefits are vested, otherwise they are recognised on a
straight-line basis over the average period the benefits become
vested.
Leave benefits
Annual leave entitlement is provided for over the period that the
leave accrues and is subject to a cap of 22 days.
Workforce reduction
Workforce reduction expenses are payable when employment
is terminated before the normal retirement age or when an
employee accepts voluntary redundancy in exchange for
benefits. Workforce reduction benefits are recognised when the
entity is demonstrably committed and it is probable that the
expenses will be incurred. In the case of an offer made to
encourage voluntary redundancy, the measurement of
termination benefits is based on the number of employees
expected to accept the offer.
Telkom Annual Report 2009 159
Notes to the consolidated annual financial statements (continued)
for the three years ended March 31, 2009
Deferred bonus incentives
Employees of the wholly owned subsidiaries of Vodacom,
including executive directors, are eligible for compensation
benefits in the form of a Deferred Bonus Incentive Scheme. The
benefit is recorded at the present value of the expected future
cash outflows.
Share-based compensation
The grants of equity instruments, made to employees in terms of
the Telkom Conditional Share Plan, are classified as equitysettled
share-based payment transactions. The expense relating
to the services rendered by the employees, and the
corresponding increase in equity, is measured at the fair value
of the equity instruments at their date of grant based on the
market price at grant date, adjusted for the lack of entitlement to
dividends during the vesting period. This compensation cost is
recognised over the vesting period, based on the best available
estimate at each balance sheet date of the number of equity
instruments that are expected to vest.
Short-term employee benefits
The cost of all short-term employee benefits is recognised during
the year the employees render services, unless the Group uses
the services of employees in the construction of an asset and the
benefits received meet the recognition criteria of an asset, at
which stage it is included as part of the related property, plant
and equipment or intangible asset item.
Long-term incentive provision
The Vodacom Group provides long-term incentives to eligible
employees payable on termination or retirement. The Group’s
liability is based on an actuarial valuation. Actuarial gains and
losses are recognised as employee expenses.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources will be required to settle
the obligation, and a reliable estimate can be made of the
amount of the obligation. Provisions are reviewed at each
balance sheet date and adjusted to reflect the current best
estimate. Where the effect of the time value of money is
material, the amount of the provision is the present value of the
expenditures expected to be required to settle the obligation.