Page 100 - China Mobile Limited - Annual Report 2012

China Mobile Limited
Annual Report 2012
94
Notes to the Financial Statements
(Expressed in Renminbi unless otherwise indicated)
1 Significant Accounting Policies (Continued)
(u) Employee benefits (Continued)
(i) Short term employee benefits and contributions to defined contribution retirement plans
(Continued)
The employees of the subsidiaries in Mainland China (For the purpose of preparing these financial
statements, Mainland China refers to the People’s Republic of China (“the PRC”) excluding Hong Kong, the
Macau Special Administrative Region of the PRC and Taiwan.) participate in the defined contribution
retirement plans managed by the local government authorities whereby the subsidiaries are required to
contribute to the schemes at fixed rates of the employees’ salary costs. In addition to the local
governmental defined contribution retirement plans, certain subsidiaries also participate in supplementary
defined contribution retirement plans managed by independent insurance companies whereby the
subsidiaries are required to make contributions to the retirement plans at fixed rates of the employees’
salary costs or in accordance with the terms of the plans. The Group’s contributions to these plans are
charged to profit or loss when incurred. The subsidiaries have no obligations for the payment of retirement
and other post-retirement benefits of staff other than the contributions described above.
(ii) Share-based payments
The fair value of share options granted to employees is recognized as an employee cost with a
corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the
binomial lattice model, taking into account the terms and conditions upon which the options were granted.
Where the employees have to meet vesting conditions before becoming unconditionally entitled to the
options, the total estimated fair value of the options is spread over the vesting period, taking into account
the probability that the options will vest.
During the vesting period, the number of share options that is expected to vest is reviewed. Any resulting
adjustment to the cumulative fair value recognized in prior years is charged/credited to the profit or loss for
the year of the review, unless the original employee expenses qualify for recognition as an asset, with a
corresponding adjustment to the capital reserve. On vesting date, the amount recognized as an expense is
adjusted to reflect the actual number of share options that vest (with a corresponding adjustment to the
capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the
market price of the Company’s shares. The equity amount is recognized in the capital reserve until either
the option is exercised (when it is transferred to the share premium account) or the option expires (when it
is released directly to retained profits). In the Company’s balance sheet, share-based payment transactions
in which the Company grants share options to subsidiaries’ employees are accounted for as an increase in
value of investments in subsidiaries, which is eliminated on consolidation.
(iii) Termination benefits
Termination benefits are recognized when, and only when, the Group demonstrably commits itself to
terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal
plan which is without realistic possibility of withdrawal.