ANNUAL REPORT 2011 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued  (r) Provisions (s)  Employee Benefits (i)  Short term obligations (ii)  Other long-term employee benefit obligations (iii)  Retirement benefit obligations (iv)  Share based payments Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable  that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the  obligation. Provisions are not recognised for future operating losses. Provisions are measured as the present value of management’s best estimate of the expenditure required to settle the present  obligation at the end of the reporting period. The discount rate used to determine the present value reflects current market  assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage  of time is recognised as an interest expense. Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months  of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are  measured at the amounts expected to be paid when the liabilities are settled. The liability for long service leave and annual leave which is not expected to be settled within 12 months of the reporting  date is recognised in the provision for employee benefits and measured as the present value of expected future payments.  Consideration is given to expected future wage and salary level, experience of employees’ departures and periods of service.  Expected future payments are discounted using market yields at the end of the reporting period on national government bonds  with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Contributions are made by the Group to superannuation funds as stipulated by statutory requirements and are charged as  expenses when incurred. Share based compensation benefits are provided to employees, consultants and contractors via the Perseus Mining Limited  Employee Option Plan. Information relating to share based payments is set out in note 29. The fair value of options granted under the Perseus Mining Limited Employee Option Plan is recognised as an employee benefits  expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of  the options granted, which includes any market performance conditions but excludes the impact of any service and non-market  performance vesting conditions. The total expense is recognised over the vesting period, which is the period over which all of the specific vesting conditions are  to be satisfied. At the end of each reporting period, the Group revises its estimate of the number of options that are expected to  become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The  impact of the revision to original estimates, if any, is recognised in the statement of comprehensive income with a corresponding  adjustment to equity. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a  market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been  modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment  arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet  recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and  designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a  modification of the original award, as described in the previous paragraph. 55