Annual Report 2015
87
2 SIGNIFICANT ACCOUNTING POLICIES
(continued)
2.6 Summary of significant accounting policies
(continued)
j) Employee benefits
(continued)
i) Pension obligations
(continued)
Remeasurements, comprising actuarial gains and losses, the effect of the asset ceiling, excluding amounts included
in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net
interest on the net defined benefit liability), are recognised immediately in the statement of financial position with a
corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements
are not reclassified to the statement of income in subsequent periods.
Past service costs are recognised in the statement of income on the earlier of:
a) The date of the plan amendment or curtailment, and
b) The date that the Group recognises related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises
the following changes in the net defined benefit obligation under ‘operating expenses’ in the consolidated statement
of income:
a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-
routine settlements
b) Net interest expense or income
The defined benefit plans mainly expose the Group to risks such as investment risk, interest rate risk and longevity
risk.
The above accounting requirement in no way affects the pension plans which continue to be governed by the approved
Trust Deed and Rules and remain under the full control of the appointed Trustees.
The full results of the valuation exercise are disclosed in Note 9 to these consolidated financial statements.
ii) Other post-retirement obligations
The Group provides post-retirement medical benefits to its retirees. The entitlement to these benefits is usually based
on the employee remaining in service up to retirement age and the completion of a minimum service period. The
expected costs of these benefits are accrued over the period of employment, using a methodology similar to that for
defined benefit pension plans. Independent qualified actuaries carry out a valuation of these obligations.
iii) Profit sharing scheme
The Group operates various employee profit sharing schemes at the subsidiary level, which are administered by Trustees
in accordance with terms outlined in the Profit Sharing Scheme Rules. The profit share to be distributed to employees
each year is based on a specific formula outlined in these Profit Sharing Scheme Rules. Employees of the parent bank
have the option to receive their profit share allocation in cash (up to a maximum of 75% of the total entitlement) and
receive the balance in ordinary shares of the Bank. The number of shares to be allocated is based on the employees’
total entitlement less the cash element, divided by the average price of the unallocated shares purchased by the
Trustees. The Group accounts for the profit share, as an expense, through the consolidated statement of income.
