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These excerpts taken from the INFA 10-K filed Feb 28, 2008. Share-Based
Payments
We account for share-based payments related to share-based
transactions in accordance with the provisions of
SFAS No. 123(R). Under the fair value recognition
provisions of SFAS No. 123(R), share-based payment is
estimated at the grant date based on the fair value of the award
and is recognized as an expense ratably over its requisite
service period. Determining the appropriate fair value model and
calculating the fair value of share-based awards requires
judgment, including estimating stock price volatility,
forfeiture rates, and expected life.
We have estimated the expected volatility as an input into the
Black-Scholes-Merton valuation formula when assessing the fair
value of options granted. Our current estimate of volatility was
based upon a blend of average historical and market-based
implied volatilities of our stock price that we have used
consistently since the adoption of SFAS No. 123(R).
Our
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historical volatility rates decreased in 2007 from 2006 and 2005
primarily due to more stable stock prices in recent quarters and
exclusion of more volatile years from the calculation of our
historical volatility rates. Our implied volatility rates
remained relatively unchanged. Our volatility rates were at
37-41% in
2007 down from
43-52% in
2006. To the extent volatility of our stock price increases in
the future, our estimates of the fair value of options granted
in the future could increase, thereby increasing share-based
payments in future periods. For instance, an estimate in
volatility 10 percentage points higher would have resulted
in a $3.8 million increase in the fair value of options
granted during the year ended December 31, 2007.
Our expected life of options granted was derived from the
historical option exercises, post-vesting cancellations, and
estimates concerning future exercises and cancellations for
vested and unvested options that remain outstanding. We lowered
our expected life estimate from 3.9 years (in 2006) to
3.3 years (in the first quarter of 2007). A reduction in
the expected life from 3.9 years to 3.3 years reduces
the expense by approximately 8% through the life of the options.
The lower expected life of options was mainly due to a reduction
in contractual term of our grants from 10 years to
7 years in April 2004, and also higher exercise volume due
to higher stock prices in recent quarters. We assumed expected
life of 3.3 years in valuing the option grants made
throughout 2007 and anticipate to continue using the same
expected life throughout 2008.
In addition, we apply an expected forfeiture rate in determining
the grant date fair value of our option grants. Our estimate of
the forfeiture rate was based primarily upon historical
experience of employee turnover. To the extent we revise this
estimate in the future, our share-based payments could be
materially impacted in the quarter of revision, as well as in
following quarters. During the year ended December 31,
2007, we lowered our forfeiture rate from 16% to 13% primarily
due to recent changes in historical employee turnover rates. As
a result of this change, our share-based payments expense
increased by approximately $0.5 million for the year ended
December 31, 2007.
We believe that the estimates that we have used for the
calculation of the variables to arrive at share-based payments
are accurate. We will, however, continue to monitor the
historical performance of these variables and will modify our
methodology and assumptions in the future as needed.
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Share-Based Payments We account for share-based payments related to share-based transactions in accordance with the provisions of SFAS No. 123(R). Under the fair value recognition provisions of SFAS No. 123(R), share-based payment is estimated at the grant date based on the fair value of the award and is recognized as an expense ratably over its requisite service period. Determining the appropriate fair value model and calculating the fair value of share-based awards requires judgment, including estimating stock price volatility, forfeiture rates, and expected life. We have estimated the expected volatility as an input into the Black-Scholes-Merton valuation formula when assessing the fair value of options granted. Our current estimate of volatility was based upon a blend of average historical and market-based implied volatilities of our stock price that we have used consistently since the adoption of SFAS No. 123(R). Our
Table of Contentshistorical volatility rates decreased in 2007 from 2006 and 2005 primarily due to more stable stock prices in recent quarters and exclusion of more volatile years from the calculation of our historical volatility rates. Our implied volatility rates remained relatively unchanged. Our volatility rates were at 37-41% in 2007 down from 43-52% in 2006. To the extent volatility of our stock price increases in the future, our estimates of the fair value of options granted in the future could increase, thereby increasing share-based payments in future periods. For instance, an estimate in volatility 10 percentage points higher would have resulted in a $3.8 million increase in the fair value of options granted during the year ended December 31, 2007. Our expected life of options granted was derived from the historical option exercises, post-vesting cancellations, and estimates concerning future exercises and cancellations for vested and unvested options that remain outstanding. We lowered our expected life estimate from 3.9 years (in 2006) to 3.3 years (in the first quarter of 2007). A reduction in the expected life from 3.9 years to 3.3 years reduces the expense by approximately 8% through the life of the options. The lower expected life of options was mainly due to a reduction in contractual term of our grants from 10 years to 7 years in April 2004, and also higher exercise volume due to higher stock prices in recent quarters. We assumed expected life of 3.3 years in valuing the option grants made throughout 2007 and anticipate to continue using the same expected life throughout 2008. In addition, we apply an expected forfeiture rate in determining the grant date fair value of our option grants. Our estimate of the forfeiture rate was based primarily upon historical experience of employee turnover. To the extent we revise this estimate in the future, our share-based payments could be materially impacted in the quarter of revision, as well as in following quarters. During the year ended December 31, 2007, we lowered our forfeiture rate from 16% to 13% primarily due to recent changes in historical employee turnover rates. As a result of this change, our share-based payments expense increased by approximately $0.5 million for the year ended December 31, 2007. We believe that the estimates that we have used for the calculation of the variables to arrive at share-based payments are accurate. We will, however, continue to monitor the historical performance of these variables and will modify our methodology and assumptions in the future as needed.
Table of ContentsThese excerpts taken from the INFA 10-K filed Jan 29, 2008. Share-Based
Payments
We account for share-based compensation related to share-based
transactions in accordance with the provisions of
SFAS No. 123(R). Under the fair value recognition
provisions of SFAS No. 123(R), share-based payment
expense is estimated at the grant date based on the fair value
of the award and is recognized as expense ratably over the
requisite service period of the award. Determining the
appropriate fair value model and calculating the fair value of
stock-based awards requires judgment, including estimating stock
price volatility, forfeiture rates, and expected life.
We have estimated the expected volatility as an input into the
Black-Scholes valuation formula when assessing the fair value of
options granted. Our current estimate of volatility was based
upon a blend of average historical and market-based implied
volatilities of our stock price. To the extent volatility of our
stock price increases in the future, our estimates of the fair
value of options granted in the future could increase, thereby
increasing share-based payment expense in future periods. For
instance, an estimate in volatility 10 percentage points
higher would have resulted in a $3.0 million increase in
the fair value of options granted during the year ended
December 31, 2006. In addition, we apply an expected
forfeiture rate when amortizing share-based payment expense. Our
estimate of the forfeiture rate is based primarily upon
historical experience of employee turnover. To the extent we
revise this estimate in the future, our share-based payment
expense could be materially impacted in the quarter of revision,
as well as in following quarters. In the fourth quarter of 2006,
we determined that the estimated forfeiture rate for unvested
options required an adjustment due to changes in retention
rates, changes in the stock price, and other factors that
generally increase an employee’s expected length of
service. We lowered our forfeiture rate from 18% during the nine
months period ended December 31, 2006 to 16% in the three
months ended December 31, 2006, primarily due to changes in
historical employee termination rates. As a result of this
change, our stock-based compensation increased approximately
$0.4 million for the three months ended December 31,
2006. Our expected term of options granted was derived from the
historical option exercises, post-vesting cancellations, and
estimates concerning future exercises/cancellations of
vested/unvested options that remain outstanding. In the future,
as empirical evidence regarding these input estimates is able to
provide more directionally predictive results, we may change or
refine our approach of deriving these input estimates. These
changes could impact our fair value of options granted in the
future.
Share-Based Payments We account for share-based compensation related to share-based transactions in accordance with the provisions of SFAS No. 123(R). Under the fair value recognition provisions of SFAS No. 123(R), share-based payment expense is estimated at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period of the award. Determining the appropriate fair value model and calculating the fair value of stock-based awards requires judgment, including estimating stock price volatility, forfeiture rates, and expected life. We have estimated the expected volatility as an input into the Black-Scholes valuation formula when assessing the fair value of options granted. Our current estimate of volatility was based upon a blend of average historical and market-based implied volatilities of our stock price. To the extent volatility of our stock price increases in the future, our estimates of the fair value of options granted in the future could increase, thereby increasing share-based payment expense in future periods. For instance, an estimate in volatility 10 percentage points higher would have resulted in a $3.0 million increase in the fair value of options granted during the year ended December 31, 2006. In addition, we apply an expected forfeiture rate when amortizing share-based payment expense. Our estimate of the forfeiture rate is based primarily upon historical experience of employee turnover. To the extent we revise this estimate in the future, our share-based payment expense could be materially impacted in the quarter of revision, as well as in following quarters. In the fourth quarter of 2006, we determined that the estimated forfeiture rate for unvested options required an adjustment due to changes in retention rates, changes in the stock price, and other factors that generally increase an employee’s expected length of service. We lowered our forfeiture rate from 18% during the nine months period ended December 31, 2006 to 16% in the three months ended December 31, 2006, primarily due to changes in historical employee termination rates. As a result of this change, our stock-based compensation increased approximately $0.4 million for the three months ended December 31, 2006. Our expected term of options granted was derived from the historical option exercises, post-vesting cancellations, and estimates concerning future exercises/cancellations of vested/unvested options that remain outstanding. In the future, as empirical evidence regarding these input estimates is able to provide more directionally predictive results, we may change or refine our approach of deriving these input estimates. These changes could impact our fair value of options granted in the future.
This excerpt taken from the INFA 10-K filed Feb 28, 2007. Share-Based
Payments
We account for share-based compensation related to share-based
transactions in accordance with the provisions of
SFAS No. 123(R). Under the fair value recognition
provisions of SFAS No. 123(R), share-based payment
expense is estimated at the grant date based on the fair value
of the award and is recognized as expense ratably over the
requisite service period of the award. Determining the
appropriate fair value model and calculating the fair value of
stock-based awards requires judgment, including estimating stock
price volatility, forfeiture rates, and expected life.
We have estimated the expected volatility as an input into the
Black-Scholes valuation formula when assessing the fair value of
options granted. Our current estimate of volatility was based
upon a blend of average historical and market-based implied
volatilities of our stock price. To the extent volatility of our
stock price increases in the future, our estimates of the fair
value of options granted in the future could increase, thereby
increasing share-based payment expense in future periods. For
instance, an estimate in volatility 10 percentage points
higher would have resulted in a $3.0 million increase in
the fair value of options granted during the year ended
December 31, 2006. In addition, we apply an expected
forfeiture rate when amortizing share-based payment expense. Our
estimate of the forfeiture rate is based primarily upon
historical experience of employee turnover. To the extent we
revise this estimate in the future, our share-based payment
expense could be materially impacted in the quarter of revision,
as well as in following quarters. In the fourth quarter of 2006,
we determined that the estimated forfeiture rate for unvested
options required an adjustment due to changes in retention
rates, changes in the stock price, and other factors that
generally increase an employee’s expected length of
service. We lowered our forfeiture rate from 18% during the nine
months period ended December 31, 2006 to 16% in the three
months ended December 31, 2006, primarily due to changes in
historical employee termination rates. As a result of this
change, our stock-based compensation increased approximately
$0.4 million for the three months ended December 31,
2006. Our expected term of options granted was derived from the
historical option exercises, post-vesting cancellations, and
estimates concerning future exercises/cancellations of
vested/unvested options that remain outstanding. In the future,
as empirical evidence regarding these input estimates is able to
provide more directionally predictive results, we may change or
refine our approach of deriving these input estimates. These
changes could impact our fair value of options granted in the
future.
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