IOOF  | Annual Report 2012 •  past practice gives clear evidence of the amount of the  obligation. (iii) Short-term employee benefits Liabilities for incentives are expected to be settled within 12  months and are measured at the amounts expected to be paid  when they are settled. payments reserve, over the period that the employees  unconditionally become entitled to the awards. The amount  recognised as an expense is adjusted to reflect the number of  awards for which the related service and non-market vesting  conditions are expected to be met, such that the amount  ultimately recognised as an expense is based on the number  of awards that meet the related service and non-market  performance conditions at vesting date. Short-term employee benefit obligations are measured on an  undiscounted basis and are expensed as the related service is  provided. For share-based payment awards with non-vesting conditions,  the grant date fair value of the share-based payment is  measured to reflect such conditions and there is no true-up for  differences between expected and actual outcomes. A liability is recognised for the amount expected to be paid  if the Group has a present legal or constructive obligation to  pay this amount as a result of past service provided by the  employee and the obligation can be estimated reliably. The fair value at grant date is independently determined where  considered appropriate. The option pricing model used takes  into account the exercise price, the term of the option, the  impact of dilution, the share price at grant date and expected  price volatility of the underlying share, the expected dividend  yield and the risk free interest rate for the term of the option. A small number of shares were held by the Trust in the  opening balance of the comparative reporting date. These  shares will contribute to the employee allocation of shares on  satisfaction of vesting performance hurdles. The Group has no  right to recall placed shares. However, a subsidiary Company  acts as the Trustee of the Trust, and can direct the voting rights  of shares held and strategic direction.  Retirement benefits are paid to Non-Executive Directors  appointed prior to 13 April 2003 to fulfil the terms of historical  agreements. This benefit provides for a cash based payment  to Non-Executive Directors at the time of their retirement. The  retirement benefit obligation is measured on an undiscounted  basis and is expensed as the related service is provided. (iv) Retirement benefit obligations (v)  Other long-term employee benefits Shares in the Company held by the Trust are classified and  disclosed as Treasury shares, and deducted from share capital.  Dividends received by the Trust are recorded as dividend  income in the financial statements of the Trust. The Group’s net obligation in respect of long-term employee  benefits is the amount of future benefit that employees have  earned in return for their service in the current and prior  periods plus related on-costs. Liabilities for long-term benefits that are expected to be  settled beyond 12 months are discounted using rates  attaching to Commonwealth Government securities which  most closely match the terms of maturity of the related  liabilities at balance date. Non-Executive Directors have the opportunity to participate  in the IOOF Deferred Share Purchase Plan. The plan provides  a facility for Non-Executive Directors to salary sacrifice base  salary or future incentive entitlements in order to acquire  shares. As the purchase is funded by Directors’ salary sacrifice,  no additional expense is recorded by the Group.  In determining the liability for employee entitlements,  consideration is given to future increases in wage and salary  rates, experience with employee departures and periods of  service. 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. Termination benefits or redundancy costs are recognised as an  expense when the Group is committed demonstrably, without  realistic opportunity of withdrawal, to a formal detailed plan  without possibility of withdrawal, or providing termination  benefits as a result of an offer made to encourage voluntary  redundancy. (j) Provisions (vi) Termination payments and redundancy costs (i) Restructuring (vii) Share-based payment transactions A provision for restructuring is recognised when the Group  has approved a detailed and formal restructuring plan, and the  restructuring either has commenced or has been announced  publicly. Future operating losses are not provided for. The grant-date fair value of share-based payment awards  granted to employees is recognised as a share-based payment  expense, with a corresponding increase in the share-based  page 67