# V. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

# 33. Employee benefits

Employee compensation includes short-term compensation, and after-service benefits, termination benefits and other long-term employee benefits provided in various forms of consideration other than share-based payment given by the Group in exchange for service rendered by employees or compensations for the termination of employment relationship. The benefits that the Group provides to the spouse, children and dependents of the employees, the late employees’ family and other beneficiaries also shall be deemed as employee benefits.

# (1). Accounting methods for short-term remuneration

# √ Applicable □ Not applicable

During an accounting period when employees render services, short-term remuneration actually incurred are recognised as a liability, and charged to profit or loss or in related costs of assets for the current period.

# (2). Accounting methods for post-employment benefits

# √ Applicable □ Not applicable

# Post-employment benefits (defined contribution plan)

If employees of the Group participate in the basic pension insurance and unemployment insurance plans managed by local governments, the relevant expenditures are recorded in the relevant asset costs or profit or loss for the current period when incurred. In addition, the Group provides an annuity plan for its eligible employees in accordance with the Labour Law. The Group’ s withdrawals and deposits for its employees are calculated based on a certain percentage of the total salary of the employees and the length of service.

# Post-employment benefits (defined benefit plans)

In addition to the above-mentioned benefit plans, the Group provides supplementary retirement benefits to its retired employees. These plans include monthly pension benefits, medical reimbursement benefits, annual medical insurance premiums and funeral benefits for employees after their retirement. The amount of the subsidies is determined based on the period during which the employee serves the Group and the relevant subsidy benefit policy.

These benefit plans beyond the scope of overall planning are considered to be based on a defined benefit plan. The defined benefit plan is calculated annually by an independent actuary using the projected unit credit method. The present value of the defined benefit obligations determined at the market yield of the government bonds during the defined benefit obligation period, and discounted over estimated future cash outflow. If there is an asset in the defined benefit plan, the present value of the defined benefit obligation minus the fair value of the asset of the defined benefit plan will be recognised as the net liability or net asset of the defined benefit plan. The change in the net liability or net asset of the defined benefit plan is divided into three parts: service cost, net interest on the net liability or net asset of the defined benefit plan, and changes due to re-measurement of net liability or net asset of the defined benefit plan included in other comprehensive income.

# V. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

# 33. Employee benefits (Continued)

# (2). Accounting methods for post-employment benefits (Continued)

# Post-employment benefits (defined benefit plans) (Continued)

Any remeasurement caused by the defined benefit plans, including actuarial gains or losses, changes in the impact of the asset cap (net of the amounts included in the net interest on the net liability of the defined benefit plan) and return on the asset in the plan (net of the amounts included in the net interest on the net liability of the defined benefit plan) are recognised in the balance sheet immediately and recorded in shareholders’ equity through other comprehensive income in the accounting period the re-measurement occurred, and shall not be reversed to profit or loss in the subsequent accounting periods.

The previous service costs should be recognised as current expenses at the earlier of the following dates: when the Group modifies the defined benefit plans; and when the Group recognises relevant restructuring costs or termination benefits.

Net interest equals to the net liability or net asset in defined benefit plan multiply by the discount rate. The Group recognised changes in the net defined benefit plan obligation as management expenses in the statement of profit. Those changes include service costs, including current service costs, previous service costs and gains and losses on settlement, and net interest, including the interest income of the asset in the plan, interest expenses of the obligation under the plan and interest of the impact of the asset cap.