HSBC 2014 Annual Report Download - page 132

HSBC BANK PLC
Notes on the Financial Statements (continued)
130
7 Share-based payments
Accounting policy
The group enters into both equity-settled and cash-settled share-based payment arrangements with its employees as compensation
for services provided by employees.
The cost of share-based payment arrangements with employees is measured by reference to the fair value of equity instruments on
the date they are granted and recognised as an expense on a straight-line basis over the vesting period, with a corresponding credit to
’Retained Earnings’.
For cash-settled share based payment arrangements, the services acquired and the liability incurred are measured at the fair value of
the liability and recognised as the employees render services. Until settlement, the fair value of the liability is re-measured over the
vesting period with a corresponding credit to ‘Retained earnings’.
Fair value is determined by using appropriate valuation models. Vesting conditions include service conditions and performance
conditions; any other features of the arrangement are non-vesting conditions.
Market performance conditions and non-vesting conditions are taken into account when estimating the fair value of the award at the
date of the award. Vesting conditions, other than market performance conditions, are not taken into account in the initial estimate of
the fair value at the grant date. They are taken into account by adjusting the number of equity instruments included in the
measurement of the transaction
A cancellation that occurs during the vesting period is treated as an acceleration of vesting and recognised immediately for the amount
that would otherwise have been recognised for services over the vesting period.
HSBC Holdings is the grantor of its equity instrument for all share awards and share options across the group. The credit to 'Retained
earnings' over the vesting period on expensing an award represents the effective capital contribution from HSBC Holdings. To the
extent the group will be, or has been, required to fund a share-based payment arrangement, this capital contribution is reduced and
the fair value of shares expected to be released to employees is recorded within 'Other liabilities'.
Income statement charge
The share-based payment income statement charge is recognised in wages and salaries (Note 5) as follows:
2014
2013
£m
£m
Restricted share awards
147
127
Savings-related and other share option plans
15
20
Year ended 31 December
162
147
HSBC Share Awards
Award
Policy
Purpose
Restricted share
awards
(including Annual
incentive awards
delivered in
shares) and GPSP
awards
• An assessment of performance over the relevant period ending
on 31
December is used to determine the amount of the award to
be granted.
•
Deferred awards generally require employees to remain in
employment over the vesting period and are not subject to
performance conditions after the grant date.
•
Deferred Annual incentive awards generally vest over a period of
three years and GPSP awards vest after five years.
•
Vested shares may be subject to a retention requirement
(restriction) post-vesting.
GPSP awards are retained until cessation of employment.
•
Awards granted from 2010 onwards are subject to malus
provision prior to vesting.
• To drive and reward performance consistent
with strategy and align to shareholder
interests.
•
Deferral provides an incentive for a longer-
term commitment and the ability to apply
malus.
Movement on HSBC share awards
Restricted share awards
2014
20131
Number
000s
Number
000s
Outstanding at 1 January
38,148
58,494
Additions during the year
28,857
17,380
Released in the year
(27,375)
(37,620)
Forfeited in the year
(852)
(775)
Transferred
(516)
669
Outstanding at 31 December
38,262
38,148
Weighted average fair value of awards granted (£)
6.19
7.17
1 Revised to only present share-based awards. Restricted awards previously reported included deferred performance awards payable in cash.