Savills plc 2012 Annual Report - (PDF) - Investor relations

Notes to the financial statementsYear ended 31 December 2012continuedDeferred income tax assets and liabilities are offset when thereis a legally enforceable right to offset current tax assets againstcurrent tax liabilities and when the deferred income tax assets andliabilities relate to income tax levied by the same taxation authorityon either the same taxable entity or different taxable entities wherethere is an intention to settle the balances on a net basis.Pension obligationsThe Group operates both defined benefit and defined contributionplans. A defined contribution plan is a pension plan under whichthe Group pays fixed contributions into a separate entity. TheGroup has no legal or constructive obligations to pay furthercontributions if the fund does not hold sufficient assets to pay allemployees the benefits relating to employee service in the currentand prior periods. A defined benefit plan is a pension plan thatdefines an amount of pension benefit that an employee will receiveon retirement, usually dependent on one or more factors, such asage, years of service and compensation.The liability recognised in the statement of financial position inrespect of defined benefit pension plans is the present value of thedefined benefit obligation at the reporting date less the fair value ofplan assets. The defined benefit obligation is calculated annuallyby independent actuaries using the projected unit credit method.The present value of the defined benefit obligation is determinedby discounting the estimated future cash outflows.The defined benefit scheme charge consists of interest costs,expected return on plan assets, past service costs and the impactof any settlements or curtailments and is charged as an expenseas they fall due.All actuarial gains and losses are recognised immediately in othercomprehensive income in the period in which they arise.The Group also operates a defined contribution Group PersonalPension Plan for new entrants and a number of definedcontribution individual pension plans. Contributions in respectof defined contribution pension schemes are charged to theincome statement when they are payable. The Group has nofurther payment obligations once the contributions have beenpaid. Prepaid contributions are recognised as an asset to theextent that a cash refund or a reduction in the future paymentsis available.The net defined benefit cost is allocated amongst participatingGroup subsidiaries on the basis of pensionable salaries.Share-based paymentsThe Group operates equity-settled share-based compensationplans. The fair value of the employee services received in exchangefor the grant of the options is recognised as an expense.Non-market vesting conditions are included in assumptions aboutthe number of options that are expected to vest. The total expenseis recognised over the vesting period, which is the period overwhich all of the specified vesting conditions are to be satisfied.At the end of each reporting period, the Group revises its estimateof the number of options that are expected to vest based on thenon-market vesting conditions. It recognises the impact of therevision to original estimates, if any, in the income statement, witha corresponding adjustment to equity.All equity-settled share-based payments are measured at fairvalue at the date of grant. The fair value determined at the grantdate of the equity-settled share-based payments is expensedon a straight-line basis over the vesting period, based on theGroup’s estimate of shares that will eventually vest.The fair value of equity-settled share-based payments ismeasured by the use of the Actuarial Binomial option pricingmodel. At each reporting date, the Group revises its estimates ofthe number of options that are expected to become exercisable.It recognises the impact of the revision of original estimates, if any,in the income statement, and a corresponding adjustment toequity over the remaining vesting period. The cash proceedsreceived net of any directly attributable transaction costs arecredited to share capital (nominal value) and share premiumwhen the options are exercised.Employee Benefit TrustThe Company has established the Savills plc 1992 EmployeeBenefit Trust (the ‘EBT’), the purposes of which are to grantawards to employees, to acquire shares in the Company pursuantto the Savills Deferred Share Bonus Plan and the Savills DeferredShare Plan and to hold shares in the Company for subsequenttransfer to employees on the vesting of the awards granted underthe schemes. The assets and liabilities of the EBT are included inthe Group statement of financial position. Investments in theGroup’s own shares are shown as a deduction from equity.ProvisionsProvisions are recognised when the Group has a present legal orconstructive obligation as a result of a past event, it is probablethat the Group will be required to settle that obligation and theamount has been reliably estimated. Provisions are measured atthe Directors’ best estimate of the expenditure required to settlethe obligation at the reporting date and are discounted to presentvalue where the effect is material.– Professional indemnity claimsProvisions on professional indemnity claims are recognisedwhen it is probable that the Group will be required to settleclaims against it as a result of a past event and the amountof the obligation can be reliably estimated.– Dilapidation provisionsThe Group is required to perform dilapidation repairs on leasedproperties prior to the properties being vacated at the end of theirlease term. Provision for such cost is made where a legal obligationis identified and the liability can be reasonably quantified.– Onerous leasesA provision is recognised where the costs of meeting theobligations under a lease contract exceed the economic benefitsexpected to be received and is measured as the net least cost ofexiting the contract, being the lower of the cost of fulfilling it andany compensation or penalties arising from the failure to fulfil it.– Restructuring provisionA provision is recognised when there is a present constructiveobligation to meet the costs of restructure. This arises when thereis a detailed formal plan for the restructuring, identifying at leastthe business or part of the business concerned, principal locationsaffected and the location, function and approximate number ofemployees to be compensated for terminating their services.70 Savills plc Report and Accounts 2012