kAThMANdu  annual report 2012 41 (ii) Long service leave the liability for long service leave is recognised in the  provision for employee benefits and measured as the present  value of expected future payments to be made in respect  of services provided by employees up to the reporting date  using the projected unit credit method. Consideration is given  to expected future wage and salary levels, experience of  employee departures and periods of service. expected future  payments are discounted using market yields at the reporting  date on national government bonds with terms to maturity  and currency that match, as closely as possible, the estimated  future cash flows. the employee Share option plan allows Group employees  to acquire shares of the Company. the fair value of options  granted is recognised as an employee expense in the  Income Statement with a corresponding increase in the  employee share based payments reserve. the fair value is  measured at grant date and spread over the vesting periods.  the fair value of the options granted is measured using the  Monte Carlo simulation approach, taking into account the  terms and conditions upon which the options are granted.  When options are exercised the amount in the share option  reserve relating to those options, together with the exercise  price paid by the employee, is transferred to share capital.  When any vested options lapse, upon employee termination  or unexercised options reaching maturity, the amount in the  share based payments reserve relating to those options is  transferred to retained earnings. the executive and Senior Management long term  Incentive plan grants Group employees performance rights  subject to performance hurdles being met. the fair value  of rights granted is recognised as an employee expense in  the Income Statement with a corresponding increase in the  employee share based payments reserve. the fair value  is measured at grant date and amortised over the vesting  periods. the fair value of the rights granted is measured  using the Kathmandu holdings limited share price as  at the grant date less the present value of the dividends  forecast to be paid prior to the each vesting date. When  performance rights vest, the amount in the share based  payments reserve relating to those rights are transferred to  share capital. When any vested performance rights lapse  upon employee termination, the amount in the share based  payments reserve relating to those rights is transferred to  retained earnings. dividend distribution to the Company shareholders is  recognised as a liability in the Company’s and Group’s financial  statements in the period in which the dividends are approved  by the Company’s shareholders. the following are definitions of the terms used in the Cash  Flow Statement: Cash comprises: cash at bank, cash on hand and  overdraft balances; Investing activities are those activities relating to the  acquisition, holding and disposal of property, plant and  equipment and of investments. Investments can include  securities not falling within the definition of cash; Financing activities are those activities which result  in changes in the size and composition of the capital  structure of the Company; operating activities include all transactions and other  events that are not investing or financing activities. there were no changes in the accounting policies during the period. the following new standards and amendments to standards  were applied during the period; the amendment simplifies and clarifies the definition of a  related party. FrS 44 sets out new Zealand specific disclosures for  entities that apply nZ IFrSs. these disclosures have  been relocated from nZ IFrSs to clarify that these  disclosures are additional to those required by IFrSs.  the harmonisation amendments amends various nZ  IFrSs for the purpose of harmonising with the source  IFrSs and australian accounting Standards. the significant  amendments include: deletion of the requirement for an independent valuer  to conduct the valuation of investment property and  property, plant and equipment;  inclusion of the option to account for investment property  using either cost or fair value model; introduction of the option to use the indirect method of  reporting cash flows that is not currently in nZ IaS 7.  In addition, various disclosure requirements have been deleted. (W) dIVIdENdS (iv) Equity settled long term incentive plan (Y) ChANGES IN ACCOuNTING POLICIES 3  STANdARdS, INTERPRETATIONS ANd AMENdMENTS TO PuBLIShEd STANdARdS NZ IAS 24: Related Parties disclosures (effective  for annual reporting periods beginning on or after  1 January 2011):  FRS 44: New Zealand Additional disclosures and  harmonisation Amendments (effective 1 July  2011):  (iii) Equity settled share option plan (X) CASh FLOW STATEMENT