2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (AC) SHARE-BASED PAYMENT TRANSACTIONS (CONTINUED) (AD) EMPLOYEE BENEFITS 69  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (i)  Wages, salaries, annual leave and sick leave (ii) Long service leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick  leave expected to be settled within 12 months of the reporting date are recognised 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. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are  measured at the rates paid or payable. The liability for long service leave is recognised 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 currencies that match, as  closely as possible, the estimated future cash outflows. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of  earnings per share. 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. 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. An additional 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 a non-vesting condition is within the control of the Consolidated Entity, Company or the employee, the failure  to satisfy the condition is treated as a cancellation. If a non-vesting condition within the control of neither the  Consolidated Entity, Company nor employee is not satisfied during the vesting period, any expense for the award  not previously recognised is recognised over the remaining vesting period, unless the award is forfeited. Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards  vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest  irrespective of whether or not the market condition is fulfilled, provided that all other conditions are satisfied. The charge to the statement of comprehensive income for the period is the cumulative amount as calculated  above less the amounts already charged in previous periods. There is a corresponding credit to equity. At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive  income is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of  awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting  period and the likelihood of non-market performance conditions being met; and (iii) the expired portion of the  vesting period. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the  period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date  on which the relevant employees become fully entitled to the award (the vesting date). In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked  to the price of the shares of Metals X Limited (market conditions) if applicable.