Eng - IOI Group

Notes To The Financial Statements cont’d5. SIGNIFICANT ACCOUNTING POLICIES cont’d5.17 Employee Benefits cont’d5.17.2 Retirement benefits cont’di. Defined contribution plansThe Group’s contributions to defined contribution plans are charged to the income statement in the period to whichthey relate. Once the contributions have been paid, the Group has no further payment obligations.ii.Defined benefit plansThe Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimatingthe amount of future benefit that employees have earned in return for their service in the current and prior periods;that benefit is discounted to determine the present value, and the fair value of any plan assets is deducted. Thediscount rate is the market yield at the balance sheet date on high quality corporate bonds or government bonds.The calculation is performed by an actuary using the projected unit credit method.When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employeesis recognised as an expense in the income statement on a straight-line basis over the average period until thebenefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately inthe income statement.In calculating the Group’s obligation in respect of a plan, to the extent that any cumulative unrecognised actuarialgain or loss exceeds ten percent of the greater of the present value of the defined benefit obligation and the fairvalue of plan assets, that portion is recognised in the income statement over the expected average remainingworking lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.Where the calculation results in a benefit to the Group, the recognised asset is limited to the net total of anyunrecognised actuarial losses and past service costs and the present value of any future refunds from the plan orreduction in future contributions to the plan.5.17.3 Equity compensation benefitsThe Group operates equity-settled share-based compensation plans, allowing the employees of the Group to acquireordinary share of the Company or of a listed subsidiary at predetermined prices. The compensation expense relating toshare options is now recognised within staff costs in the income statement over the vesting periods of the grants with acorresponding increase in equity.The total amount to be recognised as compensation expense is determined by reference to the fair value of the shareoptions at the date of the grant and the number of share options to be vested by the vesting date. The fair value of theshare options is computed using a binomial options pricing model performed by an actuary.161ANNUAL REPORT 2007IOI Corporation Berhad