2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m) Employee benefits (continued) (v) Employee share appreciation rights Employees of the Group receive remuneration in the form of share appreciation rights as consideration for services rendered. The Group has a choice of whether to settle in cash or by issuing equity instruments. However, the Group is obligated to settle in cash if issuance of equity instruments are not viable. For cash settled transactions, the cost is recognised in profit or loss, with a corresponding increase in the liabilities over the vesting period. This is initially measured by reference to the fair value of the rights at the date on which the rights are granted and subsequently at the end of each reporting period until settled, at the fair value of the share appreciation rights. The cumulative expense recognised at each reporting date reflects the will ultimately vest and change in fair value of the rights. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised at the beginning and end of that period. (n) Provisions (i) Decommissioning costs Provision for future decommissioning costs is made in full when the Group has an obligation to dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reasonable estimate of that liability can be made. Periodic estimates are made for such future facility abandonment costs. The estimated cost of decommissioning and restoration is discounted to its net present value. An amount equivalent to the discounted initial provision for decommissioning costs is capitalised and amortised over the life of the underlying asset on a unit–of–production basis over proven and probable reserves. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the oil and gas asset. The unwinding of the discount applied to future decommissioning provisions is included under finance costs in profit or loss as crude oil are produced. The estimated interest rate used in discounting the cash flow is reviewed at least annually. Any change in the expected future cost, interest rate and inflation rate are reflected as an adjustment in the provision for decommissioning costs of the corresponding oil and gas asset. The present value of decommissioning costs are revalued at the financial period–end translation rates. (ii) Other provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre–tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Financial Statements DAGANG NeXCHANGE BERHAD 220 NOTES TO THE FINANCIAL STATEMENTS
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