Annual Report 2011 - Mandarin Oriental Hotel Group

Annual Report 2011 39
P Deferred tax
Deferred tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets
and liabilities and their carrying values. Deferred tax is determined using tax rates and laws that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized
or the deferred tax liability is settled.
Provision for deferred tax is made on the revaluation of certain non-current assets and, in relation to acquisitions,
on the difference between the fair values of the net assets acquired and their tax base. Deferred tax is provided on
temporary differences associated with investments in subsidiaries, associates and joint ventures, except where the
Group is able to control the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future. Deferred tax assets relating to the carry forward of unused tax losses are
recognized to the extent that it is probable that future taxable profit will be available against which the unused tax
losses can be utilized.
Q Employee benefits
i) Pension obligations
The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in
trustee administered funds.
Pension accounting costs for defined benefit plans are assessed using the projected unit credit method. Under this
method, the costs of providing pensions are charged to profit and loss spreading the regular cost over the service
lives of employees in accordance with the advice of qualified actuaries, who carry out a full valuation of major plans
every year. The pension obligations are measured as the present value of the estimated future cash outflows by
reference to market yields on high quality corporate bonds which have terms to maturity approximating the terms
of the related liability. Plan assets are measured at fair value. Actuarial gains and losses are recognized in other
comprehensive income in the year in which they occur.
The Group’s total contributions relating to the defined contribution plans are charged to profit and loss in the year
to which they relate.
ii) Share-based compensation
The Group has an equity settled Senior Executive Share Incentive Scheme in order to provide selected executives
with options to purchase ordinary shares in the Company.
The fair value of the employee services received in exchange for the grant of the options in respect of options
granted after 7th November 2002 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 as determined on the grant date. At each
balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable.
The impact of the revision of original estimates, if any, is recognized in profit and loss.