Page 80 - Bradken Annual Report 2013_Page flip

Basic HTML Version

Notes to the Consolidated Financial Statements
30 June 2013
Notes to the consolidated financial statements
30 June 2013
1 Summary of significant accounting policies (continued)
(iv) Employee share and rights plans
(v) Retirement benefit obligations
(vi) Healthcare reserves
(v) Contributed equity
(w) Dividends
(x) Earnings per share
Basic earnings per share
(ii) Diluted earnings per share
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or rights are shown
in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or
rights for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.
The fair value of shares issued under the NEDSAP are recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at grant date.
The Group's U.S. operations primarily self-insure employee healthcare expenses. Reserves are based on historical claims
A liability or asset in respect of defined benefit superannuation plans is recognised in the balance sheet, and is measured as
the present value of the defined benefit obligation at the reporting date less the fair value of the funds assets at that date and
any unrecognised past service cost. The present value of the defined benefit obligation is based on future payments which may
arise from membership of the fund to the reporting date calculated annually by independent actuaries. Consideration is given to
the experience of employee departures and periods of service.
All employees of the Group are entitled to benefit from various superannuation or pension plans on retirement, disability or
death. The Group operates two defined benefit retirement plans, one in the United States and the other in Canada. The United
States plan is closed to new members and covers hourly employees hired before May 10, 1993 at one of our US subsidiaries.
The Canadian plan is currently active at one of our Canadian subsidiaries for hourly employees but closed on March 1, 2010 to
salaried employees. Benefits for the defined benefit plan are determined on years of credited service. The Group also
operates a number of defined contribution plans which receive fixed contributions from Group companies and the Group's legal
or constructive obligation is limited to these contributions.
If the entity reacquires its own equity instruments, eg as the result of a share buy-back, those instruments are deducted from
equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid
including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the
entity, on or before the end of the financial year but not distributed at balance date.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs
of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary shares issued during the year.
Unrecognised actuarial gains / losses in excess of the 10% corridor are being recognised on a straight-line basis over the
average life remaining service period of the active participant group.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using
market yields of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms
approximating to the terms of the related obligation. In countries where there is a deep market in high-quality corporate bonds,
the market rates on those bonds are used.
Past service costs are recognised immediately in profit or loss, unless the changes to the pension fund 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.
The fair value of Rights granted under the PRP are recognised as an employee benefit expense with a corresponding increase
in equity. The fair value is measured at grant date taking into account market performance conditions only, and spread over the
vesting period during which the employees become unconditionally entitled to the Rights. The fair value of Rights granted are
measured using the Black & Scholes Pricing Model, taking into account the terms and conditions attached to the Rights. The
amount recognised as an expense is adjusted to reflect the actual number of Rights that vest except where forfeiture is due to
market related conditions.
Share based compensation benefits are provided to employees and directors via the Performance Rights Plan ('PRP') and the
Non-Executive Director Share Acquisition Plan ('NEDSAP') respectively.
Page 44
Bradken Limited