ORCL » Topics » Stock-Based Compensation

These excerpts taken from the ORCL 10-K filed Jun 29, 2009.
Stock-Based Compensation
 
We account for share-based payments to employees, including grants of employee stock awards and purchases under employee stock purchase plans in accordance with FASB Statement No. 123 (revised 2004), Share-Based Payment, which requires that share-based payments (to the extent they are compensatory) be recognized in our consolidated statements of operations based on their fair values. In addition, we have applied certain of the provisions of the SEC’s Staff Accounting Bulletin No. 107 (Topic 14), as amended, in our accounting for Statement 123(R).
 
We are required to estimate the stock awards that we ultimately expect to vest and to reduce stock-based compensation expense for the effects of estimated forfeitures of awards over the expense recognition period. Although we estimate the rate of future forfeitures upon historical experience, actual forfeitures in the future may differ. In addition, to the extent our actual forfeitures are different than our estimates, we record a true-up for the difference in the period that the awards vest, and such true-ups could materially affect our operating results.
 
As required by Statement 123(R), we recognize stock-based compensation expense for share-based payments issued or assumed after June 1, 2006 that are expected to vest. For all share-based payments granted or assumed beginning June 1, 2006, we recognize stock-based compensation expense on a straight-line basis over the service period of the award, which is generally four years. The fair value of the unvested portion of share-based payments granted prior to June 1, 2006 is recognized over the remaining service period using the accelerated expense attribution method, net of estimated forfeitures. In determining whether an award is expected to vest, we use an estimated, forward-looking forfeiture rate based upon our historical forfeiture rates. Stock-based compensation expense recorded using an estimated forfeiture rate is updated for actual forfeitures quarterly. We also consider, each quarter, whether there have been any significant changes in facts and circumstances that would affect our expected forfeiture rate.
 
We estimate the fair value of employee stock options using a Black-Scholes valuation model. The fair value of an award is affected by our stock price on the date of grant as well as other assumptions including the estimated volatility of our stock price over the term of the awards and the estimated period of time that we expect employees to hold their stock options. The risk-free interest rate assumption we use is based upon United States treasury interest rates appropriate for the expected life of the awards. We use the implied volatility of our publicly traded, longest-term options in order to estimate future stock price trends as we believe that implied volatility is more representative of future stock price trends than historical volatility. In order to determine the estimated period of time that we expect employees to hold their stock options, we have used historical rates of employee groups by seniority of job classification. Our expected dividend rate was zero prior to our first dividend declaration in the fourth quarter of fiscal 2009 as we did not historically pay cash dividends on our common stock and did not anticipate doing so for the foreseeable future for grants issued prior to this declaration date. For grants issued subsequent to this dividend


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declaration date, we used an annualized dividend yield based on the per share dividend declared by our Board of Directors. The aforementioned inputs entered into the option valuation model we use to fair value our stock awards are subjective estimates and changes to these estimates will cause the fair value of our stock awards and related stock-based compensation expense we record to vary.
 
We record deferred tax assets for stock-based awards that result in deductions on our income tax returns, based on the amount of stock-based compensation recognized and the statutory tax rate in the jurisdiction in which we will receive a tax deduction. Because the deferred tax assets we record are based upon the stock-based compensation expenses in a particular jurisdiction, the aforementioned inputs that affect the fair value of our stock awards may also indirectly affect our income tax expense. In addition, differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on our income tax returns are recorded in additional paid-in capital. If the tax deduction is less than the deferred tax asset, such shortfalls reduce our pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase our income tax expense. Our pool of excess tax benefits is computed in accordance with the alternative transition method as prescribed under FASB Staff Position FAS 123R-3, Transition Election to Accounting for the Tax Effects of Share-Based Payment Awards.
 
To the extent we change the terms of our employee stock-based compensation programs, experience market volatility in the pricing of our common stock that increases the implied volatility calculation of our publicly traded, longest-term options or refine different assumptions in future periods such as forfeiture rates that differ from our current estimates, amongst other potential impacts, the stock-based compensation expense that we record in future periods and the tax benefits that we realize may differ significantly from what we have recorded in previous reporting periods.
 
Stock-Based
Compensation



 



We account for share-based payments to employees, including
grants of employee stock awards and purchases under employee
stock purchase plans in accordance with FASB Statement
No. 123 (revised 2004), Share-Based Payment, which
requires that share-based payments (to the extent they are
compensatory) be recognized in our consolidated statements of
operations based on their fair values. In addition, we have
applied certain of the provisions of the SEC’s Staff
Accounting Bulletin No. 107 (Topic 14), as amended, in
our accounting for Statement 123(R).


 



We are required to estimate the stock awards that we ultimately
expect to vest and to reduce stock-based compensation expense
for the effects of estimated forfeitures of awards over the
expense recognition period. Although we estimate the rate of
future forfeitures upon historical experience, actual
forfeitures in the future may differ. In addition, to the extent
our actual forfeitures are different than our estimates, we
record a
true-up for
the difference in the period that the awards vest, and such
true-ups
could materially affect our operating results.


 



As required by Statement 123(R), we recognize stock-based
compensation expense for share-based payments issued or assumed
after June 1, 2006 that are expected to vest. For all
share-based payments granted or assumed beginning June 1,
2006, we recognize stock-based compensation expense on a
straight-line basis over the service period of the award, which
is generally four years. The fair value of the unvested portion
of share-based payments granted prior to June 1, 2006 is
recognized over the remaining service period using the
accelerated expense attribution method, net of estimated
forfeitures. In determining whether an award is expected to
vest, we use an estimated, forward-looking forfeiture rate based
upon our historical forfeiture rates. Stock-based compensation
expense recorded using an estimated forfeiture rate is updated
for actual forfeitures quarterly. We also consider, each
quarter, whether there have been any significant changes in
facts and circumstances that would affect our expected
forfeiture rate.


 



We estimate the fair value of employee stock options using a
Black-Scholes valuation model. The fair value of an award is
affected by our stock price on the date of grant as well as
other assumptions including the estimated volatility of our
stock price over the term of the awards and the estimated period
of time that we expect employees to hold their stock options.
The risk-free interest rate assumption we use is based upon
United States treasury interest rates appropriate for the
expected life of the awards. We use the implied volatility of
our publicly traded, longest-term options in order to estimate
future stock price trends as we believe that implied volatility
is more representative of future stock price trends than
historical volatility. In order to determine the estimated
period of time that we expect employees to hold their stock
options, we have used historical rates of employee groups by
seniority of job classification. Our expected dividend rate was
zero prior to our first dividend declaration in the fourth
quarter of fiscal 2009 as we did not historically pay cash
dividends on our common stock and did not anticipate doing so
for the foreseeable future for grants issued prior to this
declaration date. For grants issued subsequent to this dividend





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declaration date, we used an annualized dividend yield based on
the per share dividend declared by our Board of Directors. The
aforementioned inputs entered into the option valuation model we
use to fair value our stock awards are subjective estimates and
changes to these estimates will cause the fair value of our
stock awards and related stock-based compensation expense we
record to vary.


 



We record deferred tax assets for stock-based awards that result
in deductions on our income tax returns, based on the amount of
stock-based compensation recognized and the statutory tax rate
in the jurisdiction in which we will receive a tax deduction.
Because the deferred tax assets we record are based upon the
stock-based compensation expenses in a particular jurisdiction,
the aforementioned inputs that affect the fair value of our
stock awards may also indirectly affect our income tax expense.
In addition, differences between the deferred tax assets
recognized for financial reporting purposes and the actual tax
deduction reported on our income tax returns are recorded in
additional paid-in capital. If the tax deduction is less than
the deferred tax asset, such shortfalls reduce our pool of
excess tax benefits. If the pool of excess tax benefits is
reduced to zero, then subsequent shortfalls would increase our
income tax expense. Our pool of excess tax benefits is computed
in accordance with the alternative transition method as
prescribed under FASB Staff Position
FAS 123R-3,
Transition Election to Accounting for the Tax Effects of
Share-Based Payment Awards
.


 



To the extent we change the terms of our employee stock-based
compensation programs, experience market volatility in the
pricing of our common stock that increases the implied
volatility calculation of our publicly traded, longest-term
options or refine different assumptions in future periods such
as forfeiture rates that differ from our current estimates,
amongst other potential impacts, the stock-based compensation
expense that we record in future periods and the tax benefits
that we realize may differ significantly from what we have
recorded in previous reporting periods.


 




Stock-Based Compensation
 
We account for share-based payments, including grants of employee stock awards and purchases under employee stock purchase plans, in accordance with FASB Statement No. 123 (revised 2004), Share-Based Payment, which requires that share-based payments (to the extent they are compensatory) be recognized in our consolidated


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ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2009
 
statements of operations based on their fair values and the estimated number of shares we ultimately expect will vest. In addition, we have applied certain of the provisions of the SEC’s Staff Accounting Bulletin No. 107 (Topic 14), as amended, in our accounting for Statement 123(R). We recognize stock-based compensation expense on a straight-line basis over the service period of the award, which is generally four years. The fair value of the unvested portion of share-based payments granted prior to June 1, 2006 (our adoption date of Statement 123(R)) is recognized using the accelerated expense attribution method, net of estimated forfeitures.
 
We record deferred tax assets for stock-based awards that result in deductions on our income tax returns based on the amount of stock-based compensation recognized and the statutory tax rate in the jurisdiction in which we will receive a tax deduction.
 
Stock-Based
Compensation



 



We account for share-based payments, including grants of
employee stock awards and purchases under employee stock
purchase plans, in accordance with FASB Statement No. 123
(revised 2004), Share-Based Payment, which requires that
share-based payments (to the extent they are compensatory) be
recognized in our consolidated





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ORACLE
CORPORATION

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)

May 31, 2009


 



statements of operations based on their fair values and the
estimated number of shares we ultimately expect will vest. In
addition, we have applied certain of the provisions of the
SEC’s Staff Accounting Bulletin No. 107 (Topic
14), as amended, in our accounting for Statement 123(R). We
recognize stock-based compensation expense on a straight-line
basis over the service period of the award, which is generally
four years. The fair value of the unvested portion of
share-based payments granted prior to June 1, 2006 (our
adoption date of Statement 123(R)) is recognized using the
accelerated expense attribution method, net of estimated
forfeitures.


 



We record deferred tax assets for stock-based awards that result
in deductions on our income tax returns based on the amount of
stock-based compensation recognized and the statutory tax rate
in the jurisdiction in which we will receive a tax deduction.


 




These excerpts taken from the ORCL 10-K filed Jul 2, 2008.
Stock-Based Compensation
 
We account for share-based payments, including grants of employee stock awards and purchases under employee stock purchase plans, in accordance with FASB Statement No. 123 (revised 2004), Share-Based Payment, which requires that share-based payments (to the extent they are compensatory) be recognized in our consolidated statements of operations based on their fair values and the estimated number of shares we ultimately expect will vest. In addition, we have applied the provisions of the SEC’s Staff Accounting Bulletin No. 107 in our accounting for Statement 123(R). We recognize stock-based compensation expense on a straight-line basis over the service period of the award, which is generally four years. The fair value of the unvested portion of share-based payments granted prior to June 1, 2006 (our adoption date of Statement 123(R)) is recognized using the accelerated expense attribution method, net of estimated forfeitures.
 
Prior to June 1, 2006 (our adoption date of Statement 123(R)), we accounted for our stock-based compensation plans under the intrinsic value method of accounting as defined by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and applied the disclosure provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, as amended. Under Opinion 25, we generally did not recognize any compensation expense for stock options granted to employees or outside directors as the exercise price of our options was equivalent to the market price of our common stock on the date of grant. However, we recorded stock-based compensation for the intrinsic value associated with unvested options assumed in connection with our acquisitions. For pro forma disclosures of stock-based compensation prior to June 1, 2006, the estimated fair values for options granted and options assumed were amortized using the accelerated expense attribution method. In addition, we reduced pro forma stock-based compensation expense for actual forfeitures in the periods they occurred.
 
Stock-Based
Compensation



 



We account for share-based payments, including grants of
employee stock awards and purchases under employee stock
purchase plans, in accordance with FASB Statement No. 123
(revised 2004), Share-Based Payment, which requires that
share-based payments (to the extent they are compensatory) be
recognized in our consolidated statements of operations based on
their fair values and the estimated number of shares we
ultimately expect will vest. In addition, we have applied the
provisions of the SEC’s Staff Accounting
Bulletin No. 107 in our accounting for Statement
123(R). We recognize stock-based compensation expense on a
straight-line basis over the service period of the award, which
is generally four years. The fair value of the unvested portion
of share-based payments granted prior to June 1, 2006 (our
adoption date of Statement 123(R)) is recognized using the
accelerated expense attribution method, net of estimated
forfeitures.


 



Prior to June 1, 2006 (our adoption date of Statement
123(R)), we accounted for our stock-based compensation plans
under the intrinsic value method of accounting as defined by
Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees
and applied the disclosure
provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation
, as amended. Under Opinion 25, we
generally did not recognize any compensation expense for stock
options granted to employees or outside directors as the
exercise price of our options was equivalent to the market price
of our common stock on the date of grant. However, we recorded
stock-based compensation for the intrinsic value associated with
unvested options assumed in connection with our acquisitions.
For pro forma disclosures of stock-based compensation prior to
June 1, 2006, the estimated fair values for options granted
and options assumed were amortized using the accelerated expense
attribution method. In addition, we reduced pro forma
stock-based compensation expense for actual forfeitures in the
periods they occurred.


 




This excerpt taken from the ORCL 10-K filed Jun 29, 2007.
Stock-Based Compensation
 
On June 1, 2006, we adopted FASB Statement No. 123R, Share-Based Payment, under the modified prospective method. Statement 123R generally requires share-based payments to employees, including grants of employee stock options and purchases under employee stock purchase plans, to be recognized in our consolidated statements of operations based on their fair values. Under the modified prospective method, prior period financial statements are not restated.
 
Prior to June 1, 2006, we accounted for our stock-based compensation plans under the intrinsic value method of accounting as defined by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and applied the disclosure provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, as amended. Under Opinion 25, we generally did not recognize any compensation expense for stock options granted to employees or outside directors as the exercise price of our options was equivalent to the market price of our common stock on the date of grant. However, we recorded stock-based compensation for the intrinsic value associated with unvested options assumed in connection with acquisitions. For pro forma disclosures of stock-based compensation prior to June 1, 2006, the estimated fair values for options granted and options assumed were amortized using the accelerated expense attribution method. In addition, we reduced pro forma stock-based compensation expense for actual forfeitures in the periods they occurred. In March 2005, the United States Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 107, which provides supplemental implementation guidance for Statement 123R. We have applied the provisions of SAB 107 in our adoption of Statement 123R. See Note 7 for information on the impact of our adoption of Statement 123R and the assumptions we use to calculate the fair value of share-based employee compensation.
 
This excerpt taken from the ORCL 10-Q filed Mar 27, 2007.

Stock-Based Compensation

On June 1, 2006, we adopted Statement No. 123 (revised 2004), Share-Based Payment, under the modified prospective method. Statement 123R generally requires share-based payments to employees to be recognized in our consolidated statements of operations based on their fair values. Prior to June 1, 2006, we accounted for our stock-based compensation plans under the intrinsic value method of accounting as defined by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and applied the disclosure provisions of Statement No. 123, Accounting for Stock-Based Compensation, as amended. Under Opinion 25, we generally did not recognize any compensation expense for stock options as the exercise price of our options was equivalent to the market price of our common stock on the date of grant. Substantially all of our stock-based compensation expense recognized under Opinion 25 related to options assumed from acquisitions. For pro forma disclosures, the estimated fair values for options granted and options assumed were amortized using the accelerated expense attribution method. In addition, we reduced pro forma stock compensation expense for actual forfeitures in the periods they occurred.

Upon our adoption of Statement 123R, we were required to estimate the awards that we ultimately expect to vest and to reduce stock-based compensation expense for the effects of estimated forfeitures of awards over the expense recognition period. Although we estimated forfeitures based on historical experience, forfeitures in the future may differ. Under Statement 123R, the forfeiture rate must be revised if actual forfeitures differ from our original estimates. Also in connection with our adoption of Statement 123R, we elected to recognize awards granted after our adoption date under the straight-line amortization method.

We estimate the fair value of employee stock options using a Black-Scholes valuation model. The fair value of an award is affected by our stock price on the date of grant as well as other assumptions including the estimated volatility of our stock price over the term of the awards and the estimated period of time that we expect employees to hold their stock options. The risk-free interest rate assumption is based upon United States treasury interest rates appropriate for the expected life of the awards. We use the implied volatility of our publicly traded stock options in order to estimate future stock price trends as we believe that implied volatility is more representative of future stock price trends than historical volatility. In order to determine the estimated period of time that we expect employees to hold their stock options, we have used historical rates of employee groups by job classification. Our expected dividend rate is zero since we do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future.

We record deferred tax assets for stock-based awards that result in deductions on our income tax returns, based on the amount of stock-based compensation recognized and the statutory tax rate in the jurisdiction in which we will receive a tax deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on our income tax returns are recorded in additional paid-in capital. If the tax deduction is less than the deferred tax asset, such shortfalls reduce our pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase our income tax expense. Our pool of excess tax benefits is computed in accordance with the alternative transition method as prescribed under FASB Staff Position FAS123R-3, Transition Election to Accounting for the Tax Effects of Share-Based Payment Awards.

The accounting guidance under Statement 123R is relatively new and several interpretations have been released since the pronouncement has been issued. Additional interpretations may be released and the application of these

 

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principles may be subject to further refinement over time. In addition, to the extent we change the terms of our employee stock-based compensation programs, refine different assumptions in future periods such as forfeiture rates that differ from our estimates and implement the change in our expense attribution method from accelerated to straight-line, which we elected when adopting Statement 123R, the stock-based compensation expense that we record in future periods may differ significantly from what we have recorded in the current period.

This excerpt taken from the ORCL 10-Q filed Dec 21, 2006.

Stock-Based Compensation

On June 1, 2006, we adopted Statement No. 123 (revised 2004), Share-Based Payment, under the modified prospective method. Statement 123R generally requires share-based payments to employees to be recognized in our consolidated statements of operations based on their fair values. Prior to June 1, 2006, we accounted for our stock-based compensation plans under the intrinsic value method of accounting as defined by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and applied the disclosure provisions of Statement No. 123, Accounting for Stock-Based Compensation, as amended. Under Opinion 25, we generally did not recognize any compensation expense for stock options as the exercise price of our options was equivalent to the market price of our common stock on the date of grant. Substantially all of our stock-based compensation expense recognized under Opinion 25 related to options assumed from acquisitions. For pro forma disclosures, the estimated fair values for options granted and options assumed were amortized using the accelerated expense attribution method. In addition, we reduced pro forma stock compensation expense for actual forfeitures in the periods they occurred.

Upon our adoption of Statement 123R, we were required to estimate the awards that we ultimately expect to vest and to reduce stock-based compensation expense for the effects of estimated forfeitures of awards over the expense recognition period. Although we estimated forfeitures based on historical experience, forfeitures in the future may differ. Under Statement 123R, the forfeiture rate must be revised if actual forfeitures differ from our original estimates. Also in connection with our adoption of Statement 123R, we elected to recognize awards granted after our adoption date under the straight-line amortization method.

We estimate the fair value of employee stock options using a Black-Scholes valuation model. The fair value of an award is affected by our stock price on the date of grant as well as other assumptions including the estimated volatility of our stock price over the term of the awards and the estimated period of time that we expect employees to hold their options. The risk-free interest rate assumption is based upon United States treasury interest rates appropriate for the expected life of the awards. We use the implied volatility of our publicly traded stock options in order to estimate future stock price trends as we believe that implied volatility is more representative of future stock price trends than historical volatility. In order to determine the estimated period of time that we expect employees to hold their options, we have used historical rates of employee groups by job classification. Our expected dividend rate is zero since we do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future.

We record deferred tax assets for stock-based awards that result in deductions on our income tax returns, based on the amount of stock-based compensation recognized and the statutory tax rate in the jurisdiction in which we will receive a tax deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on our income tax returns are recorded in additional paid-in capital. If the tax deduction is less than the deferred tax asset, such shortfalls reduce our pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase our income tax expense. Our pool of excess tax benefits is computed in accordance with the alternative transition method as prescribed under FASB Staff Position FAS123R-3, Transition Election to Accounting for the Tax Effects of Share-Based Payment Awards.

The accounting guidance under Statement 123R is relatively new and several interpretations have been released since the pronouncement has been issued. Additional interpretations may be released and the application of these principles may be subject to further refinement over time. In addition, to the extent we change the terms of our employee stock-based compensation programs, refine different assumptions in future periods such as forfeiture rates that differ from our estimates and implement the change in our expense attribution method from accelerated to straight-line which we elected when adopting Statement 123R, the stock-based compensation expense that we record in future periods may differ significantly from what we have recorded in the current period.

This excerpt taken from the ORCL 10-Q filed Sep 25, 2006.

Stock-Based Compensation

On June 1, 2006, we adopted Statement No. 123 (revised 2004), Share-Based Payment, under the modified prospective method. Statement 123R generally requires share-based payments to employees to be recognized in our consolidated statements of operations based on their fair values. Prior to June 1, 2006, we accounted for our stock-based compensation plans under the intrinsic value method of accounting as defined by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and applied the disclosure provisions of Statement No. 123, Accounting for Stock-Based Compensation, as amended. Under Opinion 25, we generally did not recognize any compensation expense for stock options as the exercise price of our options was equivalent to the market price of our common stock on the date of grant. Substantially all of our stock-based compensation expense recognized under Opinion 25 related to options assumed from acquisitions. For pro forma disclosures, the estimated fair values for options granted and options assumed were amortized using the accelerated expense attribution method. In addition, we reduced pro forma stock compensation expense for actual forfeitures in the periods they occurred.

Upon our adoption of Statement 123R, we were required to estimate the awards that we ultimately expect to vest and to reduce stock-based compensation expense for the effects of estimated forfeitures of awards over the expense recognition period. Although we estimated forfeitures based on historical experience, forfeitures in the future may differ. Under Statement 123R, the forfeiture rate must be revised if actual forfeitures differ from our original estimates. Also in connection with our adoption of Statement 123R, we elected to recognize awards granted after our adoption date under the straight-line amortization method.

We estimate the fair value of employee stock options using a Black-Scholes-Merton option-pricing model. The fair value of an award is affected by our stock price on the date of grant as well as other assumptions including the estimated volatility of our stock price over the term of the awards and the estimated period of time that we expect employees to hold their options. The risk-free interest rate assumption is based upon United States treasury interest rates appropriate for the expected life of the awards. We use the implied volatility of our publicly traded stock options in order to estimate future stock price trends as we believe that implied volatility is more representative of future stock price trends than historical volatility. In order to determine the estimated period of time that we expect employees to hold their options, we have used historical rates of employee groups by job classification. Our expected dividend rate is zero since we do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future.

We record deferred tax assets for stock-based awards that result in deductions on our income tax returns, based on the amount of stock-based compensation recognized and the statutory tax rate in the jurisdiction in which we will receive a tax deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on our income tax returns are recorded in additional paid-in capital. If the tax deduction is less than the deferred tax asset, such shortfalls reduce our pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase our income tax expense. Our pool of excess tax benefits is computed in accordance with the alternative transition method as prescribed under FASB Staff Position FAS123R-3, Transition Election to Accounting for the Tax Effects of Share-Based Payment Awards.

 

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The accounting guidance under Statement 123R is relatively new and several interpretations have been released since the pronouncement has been issued. Additional interpretations may be released and the application of these principles may be subject to further refinement over time. In addition, to the extent we change the terms of our employee stock-based compensation programs, refine different assumptions in future periods such as forfeiture rates that differ from our estimates and implement the changes in accounting methodologies prescribed by Statement 123R such as the change in our expense attribution method from accelerated to straight-line, the stock-based compensation expense that we record in future periods may differ significantly from what we have recorded in the current period.

This excerpt taken from the ORCL 10-K filed Jul 21, 2006.

Stock-Based Compensation

 

Up until May 31, 2006, we measured compensation expense for our stock-based incentive programs using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Under this method, we did not record compensation expense when stock options were granted to eligible participants as long as the exercise price was not less than the fair market value of the stock when the option was granted. In accordance with FASB Statement No. 123, Accounting for Stock-Based Compensation, and FASB Statement No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, we disclosed our pro forma net income or loss and net income or loss per share as if the fair value-based method had been applied in measuring compensation expense for our stock-based incentive programs.

 

We were required to adopt the provisions of FASB Statement 123(R), Share-Based Payment, in the first quarter of fiscal 2007. Although the adoption of Statement 123(R)’s fair value method has no adverse impact on our balance sheet or total cash flows, it affects our operating expenses, net income and earnings per share. The actual effects of adopting Statement 123(R) will depend on numerous factors including the amounts of share-based payments granted in the future, the valuation model we use to value future share-based payments to employees and estimated forfeiture rates. We estimate that stock-based compensation expense will reduce diluted earnings per share by $0.02 to $0.03 in fiscal 2007.

 

This excerpt taken from the ORCL 10-Q filed Apr 10, 2006.

Stock-Based Compensation

 

We currently measure compensation expense for our stock-based incentive programs using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Under this method, we do not record compensation expense when stock options are granted to eligible participants as long as the exercise price is not less than the fair market value of the stock when the option is granted. In accordance with FASB Statement No. 123, Accounting for Stock-Based Compensation, and FASB Statement No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, we disclose our pro forma net income or loss and net income or loss per share as if the fair value-based method had been applied in measuring compensation expense for our stock-based incentive programs. We have elected to follow Opinion 25 because the fair value accounting provided for under Statement 123 requires the use of option valuation models that were not developed for use in valuing incentive stock options and employee stock purchase plan shares.

 

We are required to adopt the provisions of Statement 123(R) in fiscal 2007, with early-adoption permitted. Although the adoption of Statement 123(R)’s fair value method will have no adverse impact on our balance sheet or total cash flows, it will affect our operating expenses, net income and earnings per share. The actual effects of adopting Statement 123(R) will depend on numerous factors including the amounts of share-based payments granted in the future, the valuation model we use to value future share-based payments to employees and estimated forfeiture rates. We currently estimate that the adoption of Statement 123(R) will increase operating expenses by $250 to $300 million on an annual basis.

 

This excerpt taken from the ORCL 8-K filed Mar 2, 2006.

Stock-Based Compensation

In December 2004, the FASB issued SFAS No. 123 (Revised 2004) “Share-Based Payment” (“SFAS 123R”), a revision to SFAS 123. SFAS 123R addresses all forms of share-based payment (“SBP”) awards, including shares issued under the Purchase Plan, stock options, restricted stock, restricted stock units and stock appreciation rights. SFAS 123R will require the Company to record compensation expense for SBP awards based on the fair value of the SBP awards.

Under SFAS 123R, restricted stock and restricted stock units will generally be valued by reference to the market value of freely tradable shares of the Company’s common stock. Stock options, stock appreciation rights and shares issued under the Purchase Plan will generally be valued at fair value determined through an option valuation model, such as a lattice model or the Black-Scholes option valuation model (the model that the Company currently uses for its footnote disclosure). SFAS 123R is effective for annual fiscal periods beginning after June 15, 2005.

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