72 Dialog Semiconductor Plc | Annual report and accounts 2012  |  Section 4 | Consolidated financial statements and notes Notes to the consolidated financial statements For the year ended 31 December 2012  2. Summary of significant accounting policies continued Sales tax  Revenues, expenses and assets are recognised net of the amount of sales tax, except:  The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of  financial position.  The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date, reflects the extent to which the vesting  period has expired and the best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a  period represents the movement in cumulative expense in the period.  The Group has established an equity-settled share option scheme under which employees and Directors may be granted stock options to acquire shares  of Dialog.  The fair value of options granted is recognised as a compensation expense with a corresponding increase in equity. The fair value is measured at grant  date and spread over the service period during which the employees become unconditionally entitled to the options.  The fair value of the options granted is measured using the Black-Scholes option pricing model, taking into account the terms and conditions on which  the options were granted. Expectations of early exercise are accounted for within the average life of the options. The Group applies IFRS 2 to all options  granted after 7 November 2002 that had not been vested as of 1 January 2005.  The Group operates an equity settled Long-Term Incentive Plan (LTIP). Under this plan, key executives are eligible to share in a percentage of the value  created for Shareholders in excess of an annual return hurdle measured over a four year performance period. Each participant in the LTIP is awarded a number of units which convert into Company shares according to the level of outperformance of the  Company’s share price over the annual return hurdle. If this hurdle is not reached no units convert into Company shares. The fair value of the awards is recognised as a compensation expense with a corresponding increase in equity. The fair value is measured at grant date,  using a Monte Carlo Model, taking into account the terms and conditions on which awards are granted and is spread over the service period during  which the key executives become unconditionally entitled to the awards. The last measurement date for the LTIP was 31 January 2011, the LTIP was then replaced by the Executive Incentive Plan see below. For further information please refer to note 21.B.  Stock options  Share-based payments  Executives’ Long Term Incentive Plan   Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is  recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable;   Receivables and payables that are stated with the amount of sales tax included.