Annual Reports & Accounts 2011

31 Provision for employees’ end of service benefits

In accordance with the provisions of IAS 19, management has carried out an exercise to assess the present value of its obligations at 31 December 2011 and 2010, using the projected unit credit method, in respect of employees’ end of service benefits payable under the labour laws of the countries in which the Group operates. Under this method, an assessment has been made of an employee’s expected service life with the Group and the expected basic salary at the date of leaving the service. The obligation for end of service benefit is not funded.

The movement in the employees’ end of service benefit liability over the year is as follows:

Group

	2011 USD’000		2010 USD’000
At 1 January	18,524		15,150
Acquired through a business combination (Note 35)	16,400		–
Current service cost	4,298		2,297
Interest cost	1,039		958
Actuarial losses	3,171		1,191
Benefits paid	(3,835	)	(1,072	)
At 31 December	39,597		18,524	)

Company

	2011 USD’000		2010 USD’000
At 1 January	808		592
Current service cost	77		35
Interest cost	32		22
Actuarial losses	150		159
Benefits paid	(246	)	–
At 31 December	821		808

The amounts recognised in the consolidated income statement are as follows:

Group

	2011 USD’000	2010 USD’000
Current service cost	4,298	2,297
Interest cost	1,039	958
Actuarial losses	3,171	1,191
Total (included in staff costs) (Note 11)	8,508	4,446

Of the total charge, USD 6.6m (2010: USD 3.2m) and USD 1.9m (2010: USD 1.2m) are included in "Cost of sales" and "General and administrative expenses" (Note 6 and 10).

Company

	2011 USD’000	2010 USD’000
Current service cost	77	35
Interest cost	32	22
Actuarial losses	150	159
Total (included in staff costs)	259	216

The above charge of USD 0.3m (2010: USD 0.2m) is included in "General and administrative expenses".

The principal actuarial assumptions used were as follows:

	2011	2010
Discount rate	4.25%	5.25%
Future salary increase:
Management and administrative employees	5.00%	5.00%
Yard employees	3.50%	3.50%

Due to the nature of the benefit, which is a lump sum payable on exit for any cause, a combined single decrement rate has been used as follows:

Age	Percentage of employees at each age exiting the plan per year
	2011	2010
Management, yard and administrative employees:
Below 20 years	0%	0%
20 – 29 years	15%	15%
30 – 44 years	10%	10%
45 – 54 years	7%	7%
55 – 59 years	2%	2%
60 years and above	100%	100%
Executive Directors:
35 – 39 years	10%	10%
40 – 64 years	7%	7%
65 years and above	100%	100%