BB&T 2007 Annual Report Download - page 85

BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Equity-Based Compensation
BB&T maintains various equity-based compensation plans. These plans provide for the granting of stock
options (incentive and nonqualified), stock appreciation rights, restricted stock, restricted stock units,
performance units and performance shares to selected BB&T employees and directors. BB&T adopted SFAS
No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), on January 1, 2006, using the modified-
prospective method, which requires the recognition of compensation costs beginning with the effective date based
on (a) the requirements of SFAS No. 123(R) for all share-based awards granted after the effective date and
(b) the requirements of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), for all
awards granted to employees prior to the effective date of SFAS No. 123(R) that were unvested on the effective
date.
As permitted by SFAS No. 123, BB&T accounted for share-based awards granted to employees prior to
January 1, 2006 using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25
(“APB 25”), “Accounting for Stock Issued to Employees,” and related interpretations. Since the option price
equaled the market price on the date of the grant for options awarded by BB&T, compensation cost was not
recognized for any of the periods presented, except with respect to restricted stock awards and awards that were
modified.
The following table presents BB&T’s net income, basic earnings per share and diluted earnings per share as
reported, and pro forma net income and pro forma earnings per share for years ended prior to January 1, 2006,
assuming compensation cost for BB&T’s stock option plans had been determined based on the fair value at the
grant dates for awards under those plans granted after December 31, 1994, consistent with the method
prescribed by SFAS No. 123. BB&T’s equity-based awards generally contain a provision that accelerates vesting
of awards for holders who retire and have met all retirement eligibility requirements. Prior to the adoption of
SFAS No. 123(R), BB&T reported the expense in the pro forma disclosure based on the vesting cycle in the grant
agreement and reported an acceleration of the expense for the unrecognized compensation cost in the period that
the accelerated vesting occurred. BB&T will continue to account for awards granted prior to the adoption of
SFAS No. 123(R) in this manner, with the exception that the unrecognized compensation cost on the date of
adoption will be recognized as personnel expense in future periods. For awards granted after January 1, 2006,
BB&T has recognized compensation expense based on retirement eligibility dates for all equity-based
compensation awards. Therefore, the information presented in the following table is not comparable to the
amounts recognized by BB&T during 2006 and 2007.
For the Year Ended
December 31, 2005
(Dollars in millions,
except per share
data)
Net income:
Net income as reported $1,654
Add: Equity-based compensation expense included in reported net income, net of tax —
Deduct: total equity-based employee compensation expense determined under fair
value based method for all awards, net of tax (18)
Pro forma net income $1,636
Basic EPS:
As reported $ 3.02
Pro forma 2.99
Diluted EPS:
As reported 3.00
Pro forma 2.97
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