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This excerpt taken from the WDC 10-K filed Aug 28, 2007. Pro forma
Information for Periods Prior to the Adoption of
SFAS No. 123-R
Prior to July 2, 2005, the Company accounted for
stock-based employee compensation plans (including shares issued
under the Company’s stock option plans and ESPP) in
accordance with APB No. 25 and followed the pro forma net
income, pro forma income per share, and stock-based compensation
plan disclosure requirements set forth in the Statement of
Financial Accounting Standards No. 123, “Accounting
for Stock-Based Compensation”
(“SFAS No. 123”). The following table sets
forth the computation of basic and diluted income per share for
the years ended July 1, 2005, and
Table of Contents
WESTERN
DIGITAL CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
illustrates the effect on net income and income per share as if
the Company had applied the fair value recognition provisions of
SFAS No. 123 to stock-based employee compensation (in
millions, except per share data):
The 2005 pro forma income per share information is estimated
using the Black-Scholes-Merton option-pricing model for all
stock options granted on or prior to December 31, 2004, as
well as all ESPP shares granted on or prior to July 1,
2005. The Black-Scholes-Merton option-pricing model was
developed for use in estimating the fair value of traded options
that have no vesting restrictions and are fully transferable.
For stock options granted January 1, 2005 through
July 1, 2005, the 2005 pro forma income per share
information is estimated using a binomial model. Both the
Black-Scholes-Merton and the binomial option pricing models
require the input of highly subjective assumptions such as the
expected stock price volatility and expected employee exercise
behavior. The resulting fair value of employee stock options is
amortized on a straight-line basis over the service period of
the options.
This excerpt taken from the WDC 10-K filed Nov 20, 2006. Pro forma
Information for Periods Prior to the Adoption of
SFAS No. 123-R
Prior to July 2, 2005, the Company accounted for
stock-based employee compensation plans (including shares issued
under the Company’s stock option plans and ESPP) in
accordance with APB No. 25 and followed the pro forma net
income, pro forma income per share, and stock-based compensation
plan disclosure requirements set forth in the Statement of
Financial Accounting Standards No. 123, “Accounting
for Stock-Based Compensation”
(“SFAS No. 123”). The following table sets
forth the computation of basic and diluted income per share for
the years ended July 1, 2005 and July 2, 2004, and
illustrates the effect on net income and income per share as if
the Company had applied the fair value recognition provisions of
SFAS No. 123 to stock-based employee compensation (in
millions, except per share data):
The pro forma income per share information for all stock options
granted on or prior to December 31, 2004, as well as all
ESPP shares granted on or prior to July 1, 2005, is
estimated using the Black-Scholes-Merton option-pricing model.
The Black-Scholes-Merton option-pricing model was developed for
use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. For stock
options granted subsequent to December 31,
Table of Contents
WESTERN
DIGITAL CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
2004, the pro forma income per share information is estimated
using a binomial model. Both the Black-Scholes-Merton and the
binomial option pricing models require the input of highly
subjective assumptions such as the expected stock price
volatility and expected employee exercise behavior. The
resulting fair value of employee stock options is amortized on a
straight-line basis over the service period of the options.
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