2011 - Li & Fung Limited

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NOTES TO THE ACCOUNTS (CONTINUED) 1 BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 1.15 CURRENT AND DEFERRED TAX (CONTINUED) Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 1.16 EMPLOYEE BENEFITS (a) Employee leave entitlements Employee entitlements to annual leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave entitlements as a result of services rendered by employees up to the balance sheet date. Employee entitlements to sick leave and maternity leave are not recognized until the time of leave. (b) Discretionary bonus The expected costs of discretionary bonus payments are recognized as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made. Liabilities for discretionary bonus are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled. (c) Post employment benefit obligations The Group participates in a number of defined contribution plans and defined benefit plans throughout the world, the assets of which are generally held in separate trustee – administrated funds. The defined benefit pension plans are generally funded by payments from employees and by the relevant Group companies, taking into account of the recommendations of independent qualified actuaries. The Group’s contributions to the defined contribution plans are charged to the consolidated profit and loss account in the year to which the contributions relate. For defined benefit plans, pension costs are assessed using the projected unit credit method. Under this method, the cost of providing pensions is charged to the consolidated profit and loss account so as to spread the regular cost over the service lives of employees in accordance with the advice of the actuaries who carry out a full valuation of the plans on an annual basis. The pension obligation is measured as the present value of the estimated future cash outflows, discounted by reference to market yields on high quality corporate bonds which have terms to maturity approximating the terms of the related liabilities. Actuarial gains and losses are recognized over the average remaining service lives of employees. The Group’s net obligation in respect of long service payments on cessation of employment in certain circumstances under the Hong Kong Employment Ordinance is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value and reduced by entitlements accrued under the Group’s retirement plans that are attributable to contributions made by the Group. The obligation is calculated using the projected unit credit method by a qualified actuary. The discount rate is determined by reference to market yields on high quality corporate bonds which have terms to maturity approximating the terms of the related liabilities. 86 LI & FUNG LIMITED | ANNUAL REPORT 2011
NOTES TO THE ACCOUNTS (CONTINUED) 1 BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 1.16 EMPLOYEE BENEFITS (CONTINUED) (d) Share-based compensation The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognized 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: • including any market performance conditions; • excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sale, growth targets and remaining an employee of the entity over a specified time period); and • including the impact of any non-vesting conditions (for example, the requirement for employees to save). Non-market performance vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At each balance sheet date, the Group revises its estimates on the number of options that are expected to vest. It recognizes the impact of the revision of original estimates, if any, in the consolidated profit and loss account, with a corresponding adjustment to employee share-based compensation reserve. 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. 1.17 PROVISIONS Provisions are recognized when: the Group 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 the amount has been reliably estimated. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense. 1.18 CONTINGENT LIABILITIES AND CONTINGENT ASSETS A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognized because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably. LI & FUNG LIMITED | ANNUAL REPORT 2011 87
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LI & FUNG LIMITED (Incorporated in
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CORPORATE INFORMATION NON-EXECUTIVE
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THE AMERICAS Guatemala City Lima Ma
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CHAIRMAN’S STATEMENT Victor Fung
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CHAIRMAN’S STATEMENT (CONTINUED)
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CONSUMER NEEDS THE SUPPLY CHAIN CON
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MANAGEMENT DISCUSSION & ANALYSIS Wi
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MANAGEMENT DISCUSSION & ANALYSIS (C
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CORPORATE GOVERNANCE The Board of D
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CORPORATE GOVERNANCE (CONTINUED) In
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CORPORATE GOVERNANCE (CONTINUED) LI
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CORPORATE GOVERNANCE (CONTINUED) RI
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CORPORATE GOVERNANCE (CONTINUED) CO
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CORPORATE GOVERNANCE (CONTINUED) As
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Page 42 and 43: SUSTAINABILITY OVERVIEW In 2011, we
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Page 55 and 56: REPORT OF THE DIRECTORS The directo
Page 57 and 58: Number of Share Options REPORT OF T
Page 59 and 60: SUBSIDIARIES Details of the Company
Page 61 and 62: DIRECTORS The directors during the
Page 63 and 64: REPORT OF THE DIRECTORS (CONTINUED)
Page 65 and 66: REPORT OF THE DIRECTORS (CONTINUED)
Page 67 and 68: OPINION INDEPENDENT AUDITOR’S REP
Page 69 and 70: CONSOLIDATED PROFIT AND LOSS ACCOUN
Page 71 and 72: CONSOLIDATED BALANCE SHEET As at 31
Page 73 and 74: BALANCE SHEET As at 31 December 201
Page 75 and 76: CONSOLIDATED STATEMENT OF CHANGES I
Page 77 and 78: NOTES TO THE ACCOUNTS 1 BASIS OF PR
Page 79 and 80: NOTES TO THE ACCOUNTS (CONTINUED) 1
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Page 93 and 94: 2 CRITICAL ACCOUNTING ESTIMATES AND
Page 95 and 96: 3 SEGMENT INFORMATION (CONTINUED) Y
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Page 99 and 100: 4 OPERATING PROFIT (CONTINUED) The
Page 101 and 102: 6 TAXATION (CONTINUED) NOTES TO THE
Page 103 and 104: 10 STAFF COSTS INCLUDING DIRECTORS
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Page 107 and 108: 12 INTANGIBLE ASSETS Brand Buying a
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Page 111 and 112: 13 PROPERTY, PLANT AND EQUIPMENT (C
Page 113 and 114: 17 AVAILABLE-FOR-SALE FINANCIAL ASS
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Page 117 and 118: 21 TRADE AND OTHER RECEIVABLES (CON
Page 119 and 120: 22 CASH AND CASH EQUIVALENTS NOTES
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Page 129 and 130: 27 LONG-TERM LIABILITIES NOTES TO T
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30 NOTES TO THE CONSOLIDATED CASH F
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31 BUSINESS COMBINATIONS (CONTINUED
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31 BUSINESS COMBINATIONS (CONTINUED
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36 FINANCIAL RISK MANAGEMENT NOTES
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36 FINANCIAL RISK MANAGEMENT (CONTI
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38 FAIR VALUE ESTIMATION NOTES TO T
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41 PRINCIPAL SUBSIDIARIES AND ASSOC
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LIFUNG TOWER 888 Cheung Sha Wan Roa
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2011 - Li & Fung Limited

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