HSBC 2015 Annual Report Download - page 364

Notes on the Financial Statements (continued)
6 – Employee compensation and benefits
HSBC HOLDINGS PLC
362
Reconciliation of total incentive awards granted to incentive awards in employee compensation and benefits
2015 2014 2013
$m $m $m
Total incentive awards approved and granted for the current year13,462 3,660 3,920
Less: deferred bonuses awarded for the current year, expected to be recognised
in future periods (387) (359) (436)
Total incentives awarded and recognised in the current year 3,075 3,301 3,484
Current year charges for deferred bonuses from previous years 483 425 427
Other (40) (114) (164)
Total incentive awards for the current year included in employee compensation
and benefits 3,518 3,612 3,747
1 This represents the amount of the Group variable pay pool that has been approved and granted. The total amount of Group variable pay pool
approved by the Group Remuneration Committee is disclosed in the Directors’ Remuneration Report on page 304.
Income statement charge: deferred bonuses
Current year
bonus pool
Prior year
bonus pools Total
$m $m $m
2015
Charge recognised in 2015 253 483 736
–
deferred share awards 186 382 568
–
deferred cash awards 67 101 168
Charge expected to be recognised in 2016 or later 387 346 733
–
deferred share awards 260 279 539
–
deferred cash awards 127 67 194
2014
Charge recognised in 2014 245 425 670
–
deferred share awards 147 373 520
–
deferred cash awards 98 52 150
Charge expected to be recognised in 2015 or later 359 381 740
–
deferred share awards 250 334 584
–
deferred cash awards 109 47 156
2013
Charge recognised in 2013 269 427 696
–
deferred share awards 188 354 542
–
deferred cash awards 81 73 154
Charge expected to be recognised in 2014 or later 436 306 742
–
deferred share awards 356 259 615
–
deferred cash awards 80 47 127
Share-based payments
Accounting policy
HSBC 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 equity-settled 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 liability incurred are measured at the fair value of the liability
and recognised as the employees render service. Until settlement, the fair value of the liability is re-measured, with changes in fair value
recognised in the income statement.
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 grant. 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 is recognised immediately for the amount
that would otherwise have been recognised for services over the vesting period.
Where HSBC Holdings enters into share-based payment arrangements involving employees of subsidiaries for which the subsidiaries are re-
charged, the difference between the cost of the share-based payment arrangement and the fair value of the equity instruments expected to
be issued to satisfy those arrangements is recognised as an adjustment to ‘Investment in subsidiaries’ over the vesting period.