2012 Annual Report - ZTE

ZTE CORPORATIONNotes to Financial Statements(Prepared under Hong Kong Financial Reporting Standards)31 December 201237. PROVISION FOR RETIREMENT BENEFITSThe Group and the Company provide certain of the eligible staff with post-retirement benefits pursuant to aretirement benefit plan. The plan is funded solely by the Group on an actual payment basis.The latest actuarial valuation of the plan was conducted as at 31 December 2012 in accordance with HKAS19 Employee Benefits. The present values of defined benefit obligations and current service costs aredetermined actuarially based on the projected unit credit method.The benefit obligations recognised in the statement of financial position are as follows:Group and Company2012 2011RMB’000 RMB’000Present value of the obligations 99,932 96,631Unrecognised actuarial losses (45,891) (47,915)Net liability in the statement of financial position 54,041 48,716Movements in the net liability recognised in the statement of financial position during the year are as follows:2012 2011RMB’000 RMB’000Net liability at beginning of year 48,716 43,332Benefit expenses recognised in profit or loss 6,314 6,352Pension payments made (989) (968)Net liability at end of year 54,041 48,716The principal assumptions used in determining the pension benefit obligations are shown below:2012 2011RMB’000 RMB’000(a) Discount rate 4.25% 4.00%(b)The expected rates of increase in salaries ranged from 7.3% to 10.2% per annum, which were basedon the number of years of employment.The benefit expenses recognised in profit or loss for the year are as follows:2012 2011RMB’000 RMB’000Interest cost on benefit obligations 3,845 3,735Net actuarial losses recognised in the year 2,469 2,617Benefit expense included in staff costs (note 6) 6,314 6,352400