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Share-based payments | 12 Months Ended
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Dec. 31, 2017
Disclosure Of Terms And Conditions Of Sharebased Payment Arrangement [Abstract] |
Share-based payments |
Strategic report |  | Governance report |  | Financial statements |  | Production, reserves and operations |  | Additional information
Notes to the 2017 financial statements continued 43 Share-based payments Rio Tinto plc and Rio Tinto Limited have a number of share-based incentive plans, which are described in detail in the Remuneration Report. These plans have been accounted for in accordance with the fair value recognition provisions of IFRS 2 “Share-based Payment”. The charge that has been recognised in the income statement for Rio Tinto’s share-based incentive plans, and the related liability (for cash-settled plans), is set out in the table below.
| Charge recognised for the year | Liability at the end of the year
| 2017 | 2016 | 2015 | 2017 | 2016
| US$m | US$m | US$m | US$m | US$m
Equity-settled plans | 88 | 116 | 128 | - | -
Cash-settled plans | 3 | - | - | 15 | 1
Total | 91 | 116 | 128 | 15 | 1
The main Rio Tinto plc and Rio Tinto Limited plans are as follows: Share Savings Plans Awards under these plans are settled in equity and accounted for accordingly. The fair value of each award on the day of grant was estimated using a lattice-based option valuation model, including allowance for the exercise price being at a discount to market price. Awards are no longer granted under the Share Savings Plans as these plans were replaced by the Global Employee Share Plans in 2012. All charges have been incurred as the remaining unvested awards vested during 2017. No outstanding awards remain under these plans. Share Option Plans Awards are no longer granted under the Share Option Plans and all charges have been incurred as the remaining awards all vested before 2017, although there remain outstanding vested options under these plans. UK Share Plan (formerly the Share Ownership Plan) The fair values of Matching and Free Shares made by Rio Tinto plc are taken to be the market value of the shares on the date of purchase. These awards are settled in equity. Performance Share Plans Participants are generally assigned shares in settlement of their awards on vesting and therefore the awards are accounted for in accordance with the requirements applying to equity-settled share-based payment transactions, including the dividends accumulated from date of award to vesting. For the parts of awards with Total Shareholder Return (TSR) performance conditions, the fair value of the awards was calculated using a Monte Carlo simulation model taking into account the TSR performance conditions. One-third of the awards granted since 2013 are subject to an earnings performance target relative to ten global mining comparators. As this is a non-market related performance condition, under IFRS 2, the fair value recognised is reviewed at each accounting date based on the directors’ expectations for the proportion vesting. Forfeitures prior to vesting are assumed at five per cent per annum of outstanding awards (2016: five per cent per annum). Management Share Plans The Management Share Plans were introduced in 2007 (and re-adopted in 2017) to provide conditional share-based awards to management. The vesting of these awards is dependent on service conditions being met. In general, the awards will be settled in equity, including the dividends accumulated from date of award to vesting. The awards are accounted for in accordance with the requirements applying to equity-settled share-based payment transactions. The fair value of each award on the day of grant is equal to the share price on the day of grant less a small adjustment for the timing of dividends. For awards granted in 2017 this adjustment is negligible and therefore the fair value of each award is equal to the share price on the day of grant. Forfeitures prior to vesting are assumed at seven per cent per annum of outstanding awards (2016: seven per cent per annum). Bonus Deferral Plans The Bonus Deferral Plans were introduced in 2009 for the mandatory deferral of 50 per cent of the bonuses for executive directors and product group executives and 25 per cent of the bonuses for other executives. The vesting of these awards is dependent only on service conditions being met. In general, the awards will be settled in equity including the dividends accumulated from date of award to vesting. The awards are accounted for in accordance with the requirements applying to equity-settled share-based payment transactions. The fair value of each award on the day of grant is equal to the share price on the day of grant less a small adjustment for the timing of dividends. For awards granted in 2017 this adjustment is negligible and therefore the fair value of each award is equal to the share price on the day of grant. Forfeitures prior to vesting are assumed at three per cent per annum of outstanding awards (2016: three per cent per annum). Global Employee Share Plans The Global Employee Share Plans were introduced in 2012. The Companies provide matching shares for each investment share purchased by a participant. The vesting of these matching awards is dependent on service conditions being met. These awards are settled in equity including the dividends accumulated from date of award to vesting. The fair value of each matching share on the day of grant is equal to the share price on the date of purchase less a deduction of 15 per cent for cancellations (caused by employees electing to withdraw their investment shares before vesting of their matching shares). Forfeitures prior to vesting are assumed at five per cent per annum of outstanding awards (2016: five per cent per annum). Summary of options outstanding and exercisable A summary of the status of the Companies’ equity-settled share option plans at 31 December 2017 is presented below.
Options outstanding and exercisable at 31 December 2017 | Number | Weighted average exercise price per option £/A$ | Weighted average remaining contractual life Years | Aggregate intrinsic value 2017 US$m
Rio Tinto plc Share Option Plan (exercise price £16 - £43) | 164,119 | 32 | 2.56 | 2
Rio Tinto Limited Share Option Plan (exercise price A $33) | 24,647 | 33 | 1.21 | 1
| 188,766 |  |  | 3
As at 31 December 2017 there were no options outstanding under either the Rio Tinto plc or the Rio Tinto Limited Share Savings Plans. As at 31 December 2016 there were 567,598 options outstanding with an aggregate intrinsic value of US$3 million. The Management Share Plans, Performance Share Plans, Bonus Deferral Plans, Global Employee Share Plans and UK Share Plan together represent 100 per cent (2016: 100 per cent) of the total IFRS 2 charge for Rio Tinto plc and Rio Tinto Limited plans in 2017. Performance Share Plans
| Rio Tinto plc awards | Rio Tinto Limited awards
| 2017 Number | Weighted average fair value at grant date 2017 £ | 2016 Number | Weighted average fair value at grant date 2016 £ | 2017 Number | Weighted average fair value at grant date 2017 A$ | 2016 Number | Weighted average fair value at grant date 2016 A$
Non-vested shares at 1 January | 2,883,053 | 18.27 | 2,988,454 | 21.29 | 1,590,957 | 37.52 | 2,048,823 | 41.13
Awarded | 1,198,677 | 24.64 | 1,085,974 | 12.81 | 529,776 | 45.84 | 535,418 | 28.66
Forfeited | (199,435) | 16.28 | (603,871) | 17.22 | (36,716) | 36.59 | (526,212) | 36.18
Failed performance conditions | (161,966) | 16.25 | (203,491) | 24.61 | (113,857) | 30.89 | (161,937) | 44.71
Vested | (165,055) | 21.51 | (384,013) | 24.61 | (84,284) | 40.79 | (305,135) | 44.71
Transfers from equity to cash-settled(a) | - | - | - | - | (276,722) | 40.11 | - | -
Non-vested shares at 31 December | 3,555,274 | 20.47 | 2,883,053 | 18.27 | 1,609,154 | 40.13 | 1,590,957 | 37.52
| 2017 Number | Weighted average share price 2017 £ | 2016 Number | Weighted average share price 2016 £ | 2017 Number | Weighted average share price 2017 A$ | 2016 Number | Weighted average share price 2016 A$
Vested awards settled in shares during the year (including dividend shares applied on vesting) | 188,383 | 31.04 | 368,623 | 19.08 | 73,311 | 63.09 | 284,507 | 42.99
Vested awards settled in cash during the year (including dividend shares applied on vesting) | - | - | 486 | 19.00 | 5,010 | 62.81 | 847 | 43.47
(a) | In 2017, an agreement was reached between the Group and a former director to settle any of their future vested awards in cash rather than equity.
In addition to the equity-settled awards shown above, there were 26,590 Rio Tinto plc and 276,722 Rio Tinto Limited cash-settled awards outstanding at 31 December 2017 (2016: 22,010 Rio Tinto plc cash-settled awards outstanding). The total liability for these awards at 31 December 2017 was US$9 million (2016: less than US$1 million). Notes to the 2017 financial statements continued 43 Share-based payments continued Management Share Plans, Bonus Deferral Plans, Global Employee Share Plans and UK Share Plan (combined)
| Rio Tinto plc awards(a) | Rio Tinto Limited awards
| 2017 Number | Weighted average fair value at grant date 2017 £ | 2016 Number | Weighted average fair value at grant date 2016 £ | 2017 Number | Weighted average fair value at grant date 2017 A$ | 2016 Number | Weighted average fair value at grant date 2016 A$
Non-vested awards at 1 January | 3,305,966 | 26.00 | 3,211,727 | 29.70 | 2,986,080 | 53.32 | 2,993,396 | 58.09
Awarded | 1,499,374 | 32.50 | 1,673,017 | 20.62 | 1,156,078 | 61.05 | 1,405,348 | 45.27
Forfeited | (159,669) | 29.46 | (246,806) | 23.02 | (127,905) | 53.61 | (164,020) | 54.48
Cancelled | (51,773) | 25.82 | - | - | (95,203) | 51.18 | - | -
Vested | (1,120,806) | 30.41 | (1,331,972) | 28.72 | (985,813) | 60.06 | (1,248,644) | 55.54
Non-vested shares at 31 December | 3,473,092 | 27.23 | 3,305,966 | 26.00 | 2,933,237 | 54.15 | 2,986,080 | 53.32
Comprising: |  |  |  |  |  |  |  |
– Management Share Plan | 1,897,318 | 27.99 | 1,668,590 | 25.79 | 1,617,838 | 55.42 | 1,530,814 | 53.88
– Bonus Deferral Plan | 281,994 | 25.53 | 312,767 | 23.24 | 153,966 | 52.83 | 148,158 | 50.25
– Global Employee Share Plan | 1,196,937 | 26.42 | 1,223,144 | 26.90 | 1,161,433 | 52.54 | 1,307,108 | 53.03
– UK Share Plan | 96,843 | 27.14 | 101,465 | 27.00 | - | - |  |
| 2017 Number | Weighted average fair value at grant date 2017 £ | 2016 Number | Weighted average fair value at grant date 2016 £ | 2017 Number | Weighted average fair value at grant date 2017 A$ | 2016 Number | Weighted average fair value at grant date 2016 A$
Vested awards settled in shares during the year (including dividend shares applied on vesting) |  |  |  |  |  |  |  |
– Management Share Plan | 653,776 | 35.33 | 758,776 | 20.07 | 577,083 | 67.93 | 701,965 | 43.93
– Bonus Deferral Plan | 170,036 | 34.44 | 112,623 | 30.36 | 88,644 | 69.98 | 113,407 | 56.78
– Global Employee Share Plan | 382,585 | 33.56 | 344,072 | 24.33 | 466,308 | 65.10 | 332,010 | 48.69
– UK Share Plan | 11,120 | 34.56 | 21,082 | 21.92 | - | - | - | -
(a) | Awards of Rio Tinto American Depository Receipts (ADRs) under the Global Employee Share Plan are included within the totals for Rio Tinto plc awards for the purpose of these tables
In addition to the equity-settled awards shown above, there were 33,443 Rio Tinto plc and 87,019 Rio Tinto Limited cash-settled awards outstanding at 31 December 2017 (2016: 34,517 Rio Tinto plc and 15,239 Rio Tinto Limited cash-settled awards outstanding). The total liability for these awards at 31 December 2017 was US$6 million (2016: less than US$1 million). 1

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