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This excerpt taken from the CVS 10-K filed Feb 27, 2007. Stock-based compensation
~ On January 1, 2006, the Company adopted SFAS No. 123(R), “Share-Based
Payment,” using the modified prospective transition method. Under this method,
compensation expense is recognized for options granted on or after January 1,
2006, as well as any unvested options on the date of adoption. As allowed under
the modified prospective transition method, prior period financial statements
have not been restated. Prior to January 1, 2006, the Company accounted for its
stock-based compensation plans under the recognition and measurement principles
of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock
Issued to Employees,” and related interpretations. As such, no stock based
employee compensation costs were reflected in net earnings for options granted
under those plans since they had an exercise price equal to the fair market
value of the underlying common stock on the date of grant. See Note 7 for
further information on stock-based compensation.
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