Annual - Johnson Electric

2. Principal accounting policies (Cont’d)
NOTES TO THE ACCOUNTS
2.18 EMPLOYEE BENEFITS (Cont’d)
(a) Pension obligations (Cont’d)
Past-service costs are recognised immediately as income, unless the changes to the pension plan are
conditional on the employees remaining in service for a specified period of time (the vesting period). In
this case, the past-service costs are amortised on a straight-line basis over the vesting period.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment
obligations once the contributions have been paid. The contributions are recognised as employee benefit
expense when they are due and are reduced by contributions forfeited by those employees who leave the
scheme prior to vesting fully in the contributions.
(b) Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value of the option granted
for the employee services is recognised as an expense. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the options granted, excluding the impact of any
non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting
conditions are included in assumptions about the number of options that are expected to become exercisable.
At each balance sheet date, the entity revises its estimates of the number of options that are expected to
become exercisable. It recognizes the impact of the revision of original estimates, if any, in the profit and
loss account, and a corresponding adjustment to equity over the remaining vesting period.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal
value) and share premium when the options are exercised.
(c) Employee leave entitlements
Employee entitlements to annual leave and long services leave are recognised when they accrue to
employees. A provision is made for the estimated liability for annual leave and long-service leave as a
result of services rendered by employees up to the balance sheet date.
(d) Profit sharing and bonus plan
Provisions for profit sharing and bonus plans due wholly within twelve months after balance sheet date
are recognised when the Group has a legal or constructive obligation as a result of services rendered by
employees and a reliable estimate of the obligation can be made.
2.19 PROVISIONS
Provisions are recognised when the company has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable
estimate of the amount can be made. Where the company expects a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement
is virtually certain.
Johnson Electric Holdings Limited 67