N E D N A M I B I AH O L D I N G SNotes to the Consolidated <strong>Annual</strong> Financial StatementsFOR THE YEAR ENDED 31 DECEMBER <strong>2009</strong>3. significant ACCOUNTING POLICIES (continued)3.15 Revenue recognition (continued)Non-interest incomeDividend incomeDividend income from investments is recognised when the shareholder’s rights to receive payment have been establishedon the ex-dividend date for equity instruments and is included in dividend income.Fees and commissionsFees and commissions are generally recognised on an accrual basis when the service has been provided, such as loansyndication fees. Income earned from the provision of services is recognised as the service is rendered by reference to thestage of completion of the service.Loan origination fees for loans that are probable of being drawn down, are deferred (together with related direct costs) andrecognised as an adjustment to the effective interest rate on the advance. Commission and fees arising from negotiating,or participating in the negotiation of a transaction for a third party, such as the acquisition of loans, shares or othersecurities or the purchase or sale of businesses, are recognised on completion of the underlying transaction, unless itforms an integral part of the effective interest rate of the underlying financial instruments.Foreign exchange gains and lossesForeign exchange gains and losses on monetary items arising from foreign currency transactions that have not been settledat the <strong>report</strong>ing date are recognised in income in the year in which the exchange rate movement occurred. The premiumor discount on forward exchange contracts is amortised to income over the term of the forward exchange contract.Rental incomeThe <strong>Group</strong>’s policy for recognition of revenue from operating leases is described in 3.6 above.OtherRevenue other than interest, fees and commission, which includes exchange and securities trading income, dividends frominvestments and net gains on the sale of investment banking assets, is recognised in profit or loss when the amount ofrevenue from the transaction or service can be measured reliably, it is probable that the economic benefits of the transactionor service will flow to the <strong>Group</strong> and the costs associated with the transaction or service can be measured reliably.Fair value gains or losses on financial instruments at fair value through profit or loss, including derivatives are includedin non-interest income. These fair value gains or losses are determined after deducting the interest component, which isrecognised separately in interest income and expense. Gains or losses on derecognition of any financial assets or financialliabilities are included in non-interest income.3.16 Share-based paymentsEquity-settled share-based payment transactionsThe services received in an equity-settled share-based payment transaction with employees are measured at the fair valueof the equity instruments granted. The fair value of those equity instruments is measured at grant date.90 G RO U P A N N U A L F I N A N C I A L STAT E M E N T S
3.16 Share-based payments (continued)Equity-settled share-based payment transactions (continued)If the equity instruments granted vest immediately and the employee is not required to complete a specified period ofservice before becoming unconditionally entitled to those instruments, the services received are recognised in full ongrant date in profit or loss for the period, with a corresponding increase in equity.Where the equity instruments do not vest until the employee has completed a specified period of service, it is assumedthat the services rendered by the employee, as consideration for those equity instruments, will be received in the future,during the vesting period. These services are accounted for in profit or loss as they are rendered during the vestingperiod, with a corresponding increase in equity. Share-based payment expenses are adjusted for non-market relatedperformance conditions.Where the equity instruments are no longer outstanding, the accumulated share-based payment reserve in respect ofthose equity instruments is transferred to retained earnings.Cash-settled share-based payment transactions with employeesThe services received in cash-settled share-based payment transactions with employees and the liability to pay for thoseservices, are recognised at fair value as the employee renders services. Until the liability is settled, the fair value of theliability is re-measured at each <strong>report</strong>ing date and at the date of settlement, with any changes in fair value recognised inprofit or loss for the year. Where the equity instruments do not vest until the employee has completed a specified periodof service, it is assumed that the services rendered by the employee, as consideration for those equity instruments, willbe received in the future, during the vesting period. These services are accounted for in profit or loss as they are renderedduring the vesting period, with a corresponding increase in the liability. Share-based payment expenses are adjusted fornon-market related performance conditions.Measurement of fair value of equity instruments grantedThe equity instruments granted by <strong>Nedbank</strong> <strong>Group</strong> <strong>Limited</strong> are measured at fair value at measurement date usingstandard option pricing valuation models. The valuation technique is consistent with generally acceptable valuationmethodologies for pricing financial instruments, and incorporates all factors and assumptions that knowledgeable,willing market participants would consider in setting the price of the equity instruments. Vesting conditions, other thanmarket conditions, are not taken into account in determining fair value. Vesting conditions are taken into account byadjusting the number of equity instruments included in the measurement of the transaction amount.Share-based payments with persons or entities other than employeesThe transactions in which equity instruments are issued to historically disadvantaged individuals and organisations inNamibia are accounted for as share-based payments. Where the <strong>Nedbank</strong> <strong>Group</strong> <strong>Limited</strong> has issued such shares andexpects to receive services in return for equity instruments, the share-based payments charge is spread over the relatingvesting (i.e. service) period of these instruments. In instances where such goods and services could not be identified thecost has been expensed with immediate effect. The valuation techniques are consistent with those mentioned above.3.17 Cash and cash equivalentsCash and cash equivalents comprise balances with less than 90 days maturity from the date of acquisition including: cash andbalances with central banks, treasury bills and other eligible bills, amounts due from other banks and trading securities.GROUP ANNUAL FINANCIAL STATEMENT S 91