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This excerpt taken from the HPQ 10-K filed Dec 17, 2009. Stock-Based Compensation Expense We recognize stock-based compensation expense for all share-based payment awards, net of an estimated forfeiture rate. We recognize compensation cost for only those shares expected to vest on a straight-line basis over the requisite service period of the award. Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. We utilize the Black-Scholes option pricing model to value the stock options granted under our principal option plans. To implement this model, we examined our historical pattern of option exercises to determine if there were any discernable activity patterns based on certain employee populations. From this analysis, we identified three employee populations to which to apply the Black-Scholes model. We determined that implied volatility calculated based on actively traded options on HP common stock is a better indicator of expected volatility and future stock price trends than historical volatility. Therefore, expected volatility used in the Black-Scholes option pricing model in fiscal years 2009, 2008 and 2007 was based on market-based implied volatility. We issue performance-based restricted units ("PRUs") representing hypothetical shares of HP common stock. Each PRU award reflects a target number of shares that may be issued to the award recipient. We determine the actual number of shares the recipient receives at the end of a three-year performance period based on results achieved versus goals based on our annual cash flow from operations as a percentage of revenue and average total shareholder return ("TSR") relative to the S&P 500 over the performance period. We use historic volatility for PRU awards as implied volatility 41
Management's Discussion and Analysis of cannot be used when simulating multivariate prices for companies in the S&P 500. We estimate the fair value of PRUs using the Monte Carlo simulation model, as the TSR modifier contains a market condition. We update the estimated expense, net of forfeitures, for the cashflow performance against the goal for that year at the end of each reporting period. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. See Note 2 to the Consolidated Financial Statements in Item 8 for a further discussion on stock-based compensation. These excerpts taken from the HPQ 10-K filed Dec 18, 2008. Stock-Based Compensation Expense We recognize stock-based compensation expense for all share-based payment awards granted after November 1, 2005 and granted prior to but not yet vested as of November 1, 2005, in accordance with SFAS No. 123 (revised 2004) "Share-Based Payment" ("SFAS 123R"). Under the fair value recognition provisions of SFAS 123R, we recognize stock-based compensation expense net of an estimated forfeiture rate, recognizing compensation cost for only those shares expected to vest on a straight-line basis over the requisite service period of the award. Prior to SFAS 123R adoption, we accounted for share-based payment awards under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and, accordingly, generally recognized compensation expense only when we granted options with a discounted exercise price. Determining the appropriate fair value model and calculating the fair value of share-based payment awards require subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. We utilize the Black-Scholes option pricing model to value the stock 41
Management's Discussion and Analysis of options granted under our principal option plans. To implement this model, we examined our historical pattern of option exercises in an effort to determine if there were any discernable activity patterns based on certain employee populations. From this analysis, we identified three employee populations on which to apply the Black-Scholes model. We determined that implied volatility calculated based on actively traded options on HP common stock is a better indicator of expected volatility and future stock price trends than historical volatility. Therefore, expected volatility used in the Black-Scholes option pricing model in fiscal years 2008, 2007 and 2006 was based on market-based implied volatility. We issue performance-based restricted units ("PRUs") representing hypothetical shares of HP common stock. Each PRU award reflects a target number of shares that may be issued to the award recipient. We determine the actual number of shares the recipient receives at the end of a three-year performance period based on results achieved versus goals based on our annual cash flow from operations as a percentage of revenue and average total shareholder return ("TSR") relative to the S&P 500 over the performance period. We estimate the fair value of PRUs using the Monte Carlo simulation model, as the TSR modifier contains a market condition. We update the estimated expense, net of forfeitures, for the cashflow performance against the goal for that year at the end of each reporting period. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. See Note 2 to the Consolidated Financial Statements in Item 8 for a further discussion on stock-based compensation. Stock-Based Compensation Expense We recognize stock-based compensation expense for all share-based payment awards granted after November 1, 2005 and granted Determining 41
Management's Discussion and Analysis of options We The This excerpt taken from the HPQ 10-K filed Dec 18, 2007. Stock-Based Compensation Expense See Note 2 to the Consolidated Financial Statements in Item 8, which is incorporated herein by reference. This excerpt taken from the HPQ 10-Q filed Sep 7, 2007. This excerpt taken from the HPQ 10-Q filed Jun 8, 2007. Stock-Based Compensation Expense See Note 2 to the Consolidated Condensed Financial Statements in Item 1, which is incorporated herein by reference. This excerpt taken from the HPQ 10-Q filed Mar 9, 2007. Stock-Based Compensation Expense See Note 2 to the Consolidated Condensed Financial Statements in Item 1, which is incorporated herein by reference. This excerpt taken from the HPQ 10-K filed Dec 22, 2006. Stock-Based Compensation Expense Effective November 1, 2005, we adopted the fair value recognition provisions of SFAS 123R using the modified prospective transition method and therefore have not restated results for prior periods. Our results of operations in fiscal 2006 were impacted by the recognition of non-cash expense related to the fair value of our share-based payment awards. In fiscal 2006, we recorded $536 million in pre-tax stock-based compensation expense based on SFAS 123R, of which $144 million was included in cost of sales, $70 million was included in research and development expense and $322 million was included in sales, general and administrative expense. Total stock-based compensation expense for SFAS 123R, net of taxes, in fiscal 2006 was $376 million. In addition, we recognized an adjustment of $14 million to reduce non-cash stock-based compensation expense which was included as part of our restructuring expenses. The stock-based compensation expense related to HP-granted employee stock options and the employee stock purchase plan is recorded at the corporate level and therefore does not have an impact on segment results. See Note 2 to the Consolidated Financial Statements in Item 8, which is incorporated herein by reference. This excerpt taken from the HPQ 10-Q filed Sep 11, 2006. Stock-Based Compensation Expense Effective November 1, 2005, we adopted the fair value recognition provisions of SFAS 123R using the modified prospective transition method and therefore have not restated results for prior periods. Our results of operations for the three and nine months ended July 31, 2006 were impacted by the recognition of non-cash expense related to the fair value of our share-based payment awards. During the third quarter of fiscal 2006, we recorded $127 million in pre-tax stock-based compensation expense, of which $35 million was included in cost of sales, $17 million was included in research and development expense and $75 million was included in sales, general and administrative expense. During the first nine months of fiscal 2006, we recorded $395 million in pre-tax stock-based compensation expense, of which $107 million was included in cost of sales, $50 million was included in research and development expense and $238 million was included in sales, general and administrative expense. Total stock-based compensation expense, net of tax, for the three and nine months ended July 31, 2006 was $89 million and $275 million, respectively. The stock-based compensation expense related to HP granted employee stock options and the employee stock purchase plan is recorded at the corporate level and therefore does not have an impact on segment results. See Note 2 to the Consolidated Condensed Financial Statements in Item 1, which is incorporated herein by reference. This excerpt taken from the HPQ 10-Q filed Jun 8, 2006. Stock-Based Compensation Expense Effective November 1, 2005, we adopted the fair value recognition provisions of SFAS 123R using the modified prospective transition method and therefore have not restated results for prior periods. Our results of operations for the three and six months ended April 30, 2006 were impacted by the recognition of non-cash expense related to the fair value of our stock-based compensation awards. During the second quarter of fiscal 2006, we recorded $124 million in pre-tax stock-based compensation expense, of which $33 million is included in cost of sales, $15 million is included in research and development expense and $76 million is included in sales, general and administrative expense. During the first half of fiscal 2006, we recorded $268 million in pre-tax stock-based compensation expense, of which $72 million is included in cost of sales, $33 million is included in research and development expense and $163 million is included in sales, general and administrative expense. Total stock-based compensation expense, net of tax, for the three and six months ended April 30, 2006 was $85 million and $186 million, respectively. The stock-based compensation expense related to employee stock options and the employee stock purchase plan is recorded at the corporate level and therefore does not have an impact on segment results. See Note 2 to the Consolidated Condensed Financial Statements in Item 1, which is incorporated herein by reference. 44 This excerpt taken from the HPQ 10-Q filed Mar 10, 2006. Stock-Based Compensation Expense Effective November 1, 2005, we adopted the fair value recognition provisions of SFAS 123R using the modified prospective transition method and therefore have not restated results for prior periods. Our results of operations for the first quarter of fiscal 2006 were impacted by the recognition of non-cash expense related to the fair value of our stock-based compensation awards. During the first quarter of fiscal 2006, we recorded $144 million in pre-tax stock-based compensation expense, of which $39 million is included in cost of sales, $18 million is included in research and development expense and $87 million is included in sales, general and administrative expense. Total stock-based compensation expense, net of tax, for the three months ended January 31, 2006 was $101 million. Also, the stock-based compensation expense related to employee stock options and the employee stock purchase plan is held at the corporate level and therefore does not have an impact on segment results. See Note 2 to the Consolidated Condensed Financial Statements in Item 1, which is incorporated herein by reference. | EXCERPTS ON THIS PAGE:
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