7 Disclosures of Remuneration of Specified Directors and Specified Executives
7.1 In respect of each specified director and specified executive, the following details must be disclosed:
(a) total remuneration for the reporting period, remuneration being determined in accordance with paragraph 5.1 and measured in accordance with Section 6; and
(b) the components of each individual’s remuneration, as categorised and prescribed in paragraph 5.2.
7.2 The aggregate of the total remuneration for individuals and the aggregate for each component must be disclosed for each of the following groups:
(a) specified directors; and
(b) specified executives.
7.2.1 In accordance with paragraph 11.1, disclosure of comparative amounts for the preceding reporting period is not required for individuals who were not specified in the preceding reporting period. Disclosure of comparative amounts for the preceding reporting period is required for each aggregate of total remuneration and aggregate of components. Appendix 3 provides an illustration of disclosures required by paragraphs 7.1 and 7.2.
7.2.2 It is not necessary to separate disclosure of the remuneration of the specified executives into parent entity and economic entity, based on which entity it is that employs them.
Remuneration for Part-period Employees
7.3 Where a specified individual has been employed by the entity for part of the reporting period when neither a director nor an executive, remuneration received in the capacity of employee is not included in the remuneration required to be disclosed in accordance with paragraph 7.1.
7.4 Where a specified director has been a director of the disclosing entity for part of the reporting period and an executive of the disclosing entity or any of its subsidiaries for some other part of the reporting period, all remuneration from these entities during the reporting period must be disclosed as that director’s remuneration, separately identifying the amount of remuneration attributable to the part of the reporting period during which the executive was a director.
7.4.1 The definition of specified director in paragraph 12.1 includes any director of the disclosing entity holding that office at any time during the reporting period. In some cases, an executive of the disclosing entity (or any other entity in the economic entity) may also be a director of the disclosing entity for part of a reporting period. This would occur if an executive were appointed as a director of the disclosing entity at some point after the start of the reporting period or if a director of the disclosing entity resigned from the office of director before the reporting date but remained an executive of an entity within the economic entity.
Section 7 - AASB 1046 - Director and Executive Disclosures by Disclosing Entities - January 2004 - Disclosures of Remuneration of Specified Directors and Specified Executives | Zoe
7.4.2 In determining the extent of remuneration provided in the reporting period to a specified director, it would be inappropriate to permit exclusion of amounts arising during the part or parts of the period when the person was an executive of the disclosing entity or any of its subsidiaries but was not a director of the disclosing entity. If such amounts were excluded and remuneration restricted solely to that arising during the period of directorship, then it is possible for considerable gaps in disclosure to arise. In such cases, the remuneration for the entire reporting period would effectively relate to the activities of the individual as part of the key management team and permitting its non-disclosure would understate the cost of corporate governance. However, separate identification of amounts arising while holding the position of director and amounts related to employment as an executive (when not a director) will assist users to distinguish how an entity pays its directors from how it structures remuneration of other executives.
7.4.3 The distinction between those employees who are executives and those who are not is less easily defined than a distinction based on status as director. However, an employee who was not an executive would not have been part of the key management team and it is appropriate that remuneration for that part of the period be excluded.
7.5 The following details concerning the remuneration of specified directors and specified executives must be disclosed:
(a) the principles used to determine the nature and amount of remuneration;
(b) whether, and if so how, the principles establish a relationship between remuneration and the entity’s performance;
(c) for each contract for services between a specified director or specified executive and the disclosing entity (or any of its subsidiaries), such explanations as are necessary in addition to those prescribed in paragraph 7.5(d) to provide an understanding of how the amount of remuneration in the current reporting period was determined and how the terms of the contract affect remuneration in future periods; and
(d) for each grant of a cash bonus, performance-related bonus or share-based payment compensation benefit, whether part of a specific contract for services or not, the terms and conditions of each grant affecting remuneration in this or future reporting periods and including:
(i) the grant date;
(ii) the nature of the remuneration granted;
(iii) the service and performance criteria used to determine the amount of remuneration; and
(iv) if there has been any alteration of the terms or conditions of the grant since the grant date, the date, details and effect of each alteration.
7.5.1 Entities may enter into contracts for services with directors or executives that may have notice periods or provide for pre-determined compensation on voluntary or involuntary retirement of the person or on takeover of the entity. Disclosure of the existence of each such contract is required by this Standard. The details required by paragraph 7.5(c) include such items as the length of notice or contract periods, whether or not the contract provides for pre-determined compensation, the basis for determining compensation and the timing and manner of payment of any such compensation. Where a contract involves a grant of benefits that is not fully vested by reporting date, disclosure will include the details required in accordance with paragraph 7.5(d).
7.5.2 Examples of terms and conditions to be disclosed in addition to those explicitly specified in paragraph 7.5(d) include:
(a) whether shareholder approval is required (or has been obtained and, if so, when);
(b) whether benefits are payable (or vest) annually during the performance period or only at the end of the grant (or performance) period; and
(c) any restrictions on transfer of equity instruments after vesting.
7.5.3 Paragraph 7.5(d) requires specific details of bonus plans to be disclosed in addition to the general description of principles in respect of remuneration required by paragraphs 7.5(a) and 7.5(b) and the contractual terms required by paragraph 7.5(c). It requires that the terms and conditions of each grant of performance-based benefits to a specified director or specified executive be disclosed in all reporting periods during which the grant is operative, including the initial reporting period in which granted. It requires identification of the type of compensation, the period over which the grant is operative, the performance criteria (for example, measures such as return on assets, return on equity, share price, continued service) and, if applicable, details of alterations. While it is expected that most grants will be prospective, benefits covered by paragraph 7.5 include retrospective grants, bonuses and allocations, whether cash, equity or other benefits, that have not previously been disclosed as remuneration.
7.5.4 Where contracts with directors and executives apply to services and performance over a period longer than one reporting period, the dollar amount of such benefits disclosed as remuneration in the reporting period is determined in accordance with Appendices 2 and 6. Paragraph 5.2(a)(ii) requires disclosure of the amount of bonuses (excluding equity compensation) earned in the current reporting period, specifically identifying amounts resulting from any long-term incentive plan. Long-term incentive benefits in the form of equity compensation are included in disclosures required by paragraph 5.2(c), as remuneration allocated to the reporting period.
7.5.5 Section 8 of this Standard requires disclosure of a comprehensive account of all equity transactions with and holdings by specified directors and specified executives.
Altering the Terms of Options or Rights
7.6 Where the terms of options or rights provided as remuneration to a specified director or specified executive have been altered by the issuing entity during the reporting period, the following details must be disclosed for each specified person:
(a) the date of each alteration of the terms;
(b) the market price of the underlying equity instrument at the date of alteration;
(c) the terms of the option or right immediately prior to alteration, including the number and class of the underlying equity instruments, exercise price, time remaining until expiry and each other condition in the terms affecting the exercise of the option or right;
(d) the new terms; and
(e) the difference between the total of the fair value of the options or rights affected by the alteration immediately before the alteration and the total of the fair value of those options or rights immediately after the alteration.
7.6.1 Paragraph 7.6 applies to those persons who are specified directors and specified executives for the current reporting period, whether or not they were specified at the vesting date or grant date. It does not apply to a person who is not a specified person in the current reporting period but was so included in the reporting period in which vesting occurred or the grant was made.
7.6.2 The purpose of disclosures in respect of the alteration of the terms of options or rights is to show the benefit provided to directors and executives in the reporting period from the adjustment of exercise prices or other terms.
7.6.3 An alteration of terms or other repricing that occurs on or after the vesting date will require inclusion of the total benefit calculated under paragraph 7.6(e) as a component of remuneration in the reporting period in which repricing occurs, disclosed under paragraph 5.2(c)(iii). When the terms are altered before vesting date, the total benefit is disclosed in accordance with paragraph 7.6(e) but not included as remuneration under paragraph 5.2(c)(iii). In such cases, the total benefit is added to the original value of the grant and included in the allocations to remuneration over the remainder of the vesting period, thus increasing remuneration disclosed in accordance with paragraph 5.2(c)(ii).
7.6.4 When a specified director or specified executive leaves the entity earlier than expected and this results in premature vesting of equity compensation, this constitutes an alteration of terms in accordance with paragraph 7.6, affecting those equity instruments that would not otherwise have yet vested. Any balance of the grant that remains to be allocated in accordance with Appendix 6 is included as remuneration of that person in that period, disclosed under paragraph 5.2(c)(iii).