Electronic Arts 2015 Annual Report Download - page 157

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Annual Report
•Stock Options and Employee Stock Purchase Plan. The fair value of stock options and stock purchase
rights granted pursuant to our equity incentive plans and our 2000 Employee Stock Purchase Plan
(“ESPP”), respectively, is determined using the Black-Scholes valuation model based on the multiple-
award valuation method. Key assumptions of the Black-Scholes valuation model are the risk-free
interest rate, expected volatility, expected term and expected dividends. The risk-free interest rate is
based on U.S. Treasury yields in effect at the time of grant for the expected term of the option.
Expected volatility is based on a combination of historical stock price volatility and implied volatility
of publicly-traded options on our common stock. Expected term is determined based on historical
exercise behavior, post-vesting termination patterns, options outstanding and future expected exercise
behavior.
The estimated assumptions used in the Black-Scholes valuation model to value our stock option grants and ESPP
were as follows:
Stock Option Grants ESPP
Year Ended March 31, Year Ended March 31,
2015 2014 2013 2015 2014 2013
Risk-free interest rate ....... 1.1-1.9% 1.6% 0.4 - 1.0% .04 - 0.2% 0.1% 0.1 - 0.2%
Expected volatility .......... 36-40% 37-42% 40-46% 30-35% 36-38% 35-42%
Weighted-average volatility . . 38% 37% 43% 34% 38% 38%
Expected term ............. 4.5years 4.5 years 4.4 years 6 - 12 months 6 - 12 months 6 - 12 months
Expected dividends ......... None None None None None None
The estimated assumptions used in the Monte-Carlo simulation model to value our market-based restricted stock
units were as follows:
Year Ended
March 31, 2015
Year Ended
March 31, 2014
Year Ended
March 31, 2013
Risk-free interest rate ................................... 0.9% 0.4% 0.2 - 0.4%
Expected volatility ...................................... 16-79% 16-58% 17-116%
Weighted-average volatility .............................. 30% 31% 35%
Expected dividends ..................................... None None None
Stock-Based Compensation Expense
Employee stock-based compensation expense recognized during the fiscal years ended March 31, 2015, 2014 and
2013 was calculated based on awards ultimately expected to vest and has been reduced for estimated forfeitures.
In subsequent periods, if actual forfeitures differ from those estimates, an adjustment to stock-based
compensation expense will be recognized at that time.
The following table summarizes stock-based compensation expense resulting from stock options, restricted stock,
restricted stock units, performance-based restricted stock units, market-based restricted stock units, and the ESPP
included in our Consolidated Statements of Operations (in millions):
Year Ended March 31,
2015 2014 2013
Cost of revenue ..................................................... $ 2 $ 2 $ 2
Research and development ............................................ 82 90 94
Marketing and sales ................................................. 21 26 30
General and administrative ............................................ 39 32 38
Stock-based compensation expense ................................... $144 $150 $164
During the fiscal years ended March 31, 2015, 2014 and 2013, we did not recognize any benefit from income
taxes related to our stock-based compensation expense.
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