2012 Annual Report - ZTE

ZTE CORPORATIONNotes to Financial Statements(Prepared under Hong Kong Financial Reporting Standards)31 December 20122.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Employee benefitsDefined contribution pension schemesThe Company and certain of its subsidiaries established in the PRC have joined a number of definedcontribution pension schemes organised by the relevant provincial and municipal social insurance managementbodies of the PRC government for those employees who are eligible to participate in the schemes. TheCompany, these subsidiaries and the employees are required to make monthly contributions to these planscalculated as a percentage of the employees’ salaries during the year. The contributions payable are chargedas an expense to profit or loss as incurred. The assets of the schemes are held separately from those ofthe Group in independently administered funds.Defined benefit pension schemeIn addition, the Group provides certain employees, who joined the Group before 1 January 2002, withpost-retirement monthly pension payments. The cost of providing these benefits under the Group’s definedbenefit pension scheme is actuarially determined and recognised over the employees’ service period byusing the projected unit credit method. The Group makes monthly pension payments to eligible retirees andno contribution has been made to fund future obligations since the commencement of the defined benefitpension scheme. Therefore, there are no assets in respect of this scheme held separately from those of theGroup in independently administered funds and no actuarial valuation for the plan assets has been conducted.Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognisedactuarial gains and losses for the plan at the end of the previous period exceeded 10% of the definedbenefit obligation at that date. These gains or losses are recognised over the expected average remainingservice periods of the employees participating in the plan.Past service costs are recognised as an expense on the straight-line basis over the average period untilthe benefits become vested. If the benefits are already vested immediately following the introduction of, orchanges to, the pension scheme, past service costs are recognised immediately.The defined benefit liability comprises the present value of the defined benefit obligation less past servicecosts not yet recognised. The value of any defined benefit asset recognised is restricted to the sum of anypast service costs not yet recognised and the present value of any economic benefits available in the formof refunds from the scheme or reductions in the future contributions to the plan.352