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Integrated Report 2016
ANNUAL FINANCIAL STATEMENTS
(continued)
Past service costs are expensed on a straight-line basis over the average period until the benefits become vested. If the benefits vest immediately
following the introduction of, or changes to, a defined benefit plan, the past service cost is recognised immediately.
POST-RETIREMENT MEDICAL OBLIGATIONS
The Group provides post-retirement healthcare benefits to certain of its retirees and one employee still in service. The expected costs of these
benefits are accrued over the period of employment, using the projected unit credit method. Valuations are based on assumptions which
include employee turnover, mortality rates, a discount rate based on current bond yields of appropriate terms and healthcare inflation costs.
Valuations of these obligations are carried out by independent qualified actuaries.
Actuarial gains or losses are recognised in the same manner as those of the defined benefit obligation.
SHARE-BASED PAYMENTS
Certain employees of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services
as consideration for equity instruments (“equity-settled transactions”) or share appreciation rights (“cash-settled transactions”).
EQUITY-SETTLED TRANSACTIONS
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair
value is determined by an external appraiser using a modified version of the Black-Scholes model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the service
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). The
cumulative expense recognised reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of
equity instruments that will ultimately vest. The charge in the statement of comprehensive income in profit or loss for a period represents the
movement in the cumulative expense between the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a
market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,
provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had
not been modified, if the original terms of the award are met. If at the date of modification, the total fair value of the share-based payment is
increased, or is otherwise beneficial to the employee, the difference is recognised as an additional expense.
Where an equity-settled award is cancelled (other than forfeiture), it is treated as if it had vested on the date of cancellation (acceleration of
vesting), and any unrecognised expense recognised immediately. Any payment made to the employee on the cancellation or settlement of
the grant shall be accounted for as the repurchase of an equity interest, i.e. as a deduction from equity, except to the extent that the payment
exceeds the fair value of the equity instruments granted, measured at the repurchase date. Any such excess shall be recognised as an expense.
This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new
award is substituted and designated as a replacement for the cancelled award, the cancelled and new awards are treated as if they were a
modification of the original award, as described above. The dilutive effect of outstanding equity-settled options is reflected as additional share
dilution in the computation of diluted earnings and diluted headline earnings per share.
CASH-SETTLED TRANSACTIONS
The cost of cash-settled transactions is measured initially at fair value at the grant date using a modified version of the Black-Scholes model,
taking into account the terms and conditions upon which the instruments were granted. This fair value is expensed over the period until
vesting with recognition of a corresponding liability. The liability is remeasured to its fair value at each reporting date up to and including the
settlement date with changes in fair value recognised in profit or loss.
ACCOUNTING FOR BEE TRANSACTIONS
Where equity instruments are issued to a Black Economic Empowerment (BEE) party at less than fair value, the instruments are accounted for
as share-based payments in terms of the stated accounting policy.
Any difference between the fair value of the equity instrument issued and the consideration received is accounted for as an expense in the
statement of comprehensive income through profit or loss.
ANNEXURE I – ACCOUNTING POLICIES
CONTINUED