Electronic Arts 2016 Annual Report Download - page 167

Annual Report
The assumptions used in the Monte-Carlo simulation model to value our market-based restricted stock units were
as follows:
Year Ended March 31,
2016 2015 2014
Risk-free interest rate .................................................. 1.0% 0.9% 0.4%
Expected volatility .................................................... 14-53%16-79%16-58%
Weighted-average volatility ............................................. 26% 30% 31%
Expected dividends .................................................... None None None
Stock-Based Compensation Expense
Employee stock-based compensation expense recognized during the fiscal years ended March 31, 2016, 2015 and
2014 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
units, market-based restricted stock units, and the ESPP included in our Consolidated Statements of Operations
(in millions):
Year Ended March 31,
2016 2015 2014
Cost of revenue ..................................................... $ 2 $ 2 $ 2
Research and development ............................................ 103 82 90
Marketing and sales ................................................. 24 21 26
General and administrative ............................................ 49 39 32
Stock-based compensation expense ................................... $178 $144 $150
During the fiscal years ended March 31, 2016 we recognized a $38 million deferred income tax benefit related to
our stock-based compensation expense. During the fiscal years ended March 31, 2015 and 2014, we did not
recognize any benefit from income taxes related to our stock-based compensation expense.
As of March 31, 2016, our total unrecognized compensation cost related to restricted stock and restricted stock
units (collectively referred to as “restricted stock rights”) was $243 million and is expected to be recognized over
a weighted-average service period of 1.3 years. Of the $243 million of unrecognized compensation cost, $26
million relates to market-based restricted stock units. As of March 31, 2016, our total unrecognized
compensation cost related to stock options was $9 million and is expected to be recognized over a weighted-
average service period of 1.4 years.
For the fiscal year ended March 31, 2016, we recognized $83 million of income tax benefit from the exercise of
stock-based compensation, net of $3 million of deferred tax write-offs; of this amount $86 million of excess tax
benefit related to stock-based compensation deductions was reported in the financing activities on our
Consolidated Statements of Cash Flows. For fiscal years ended fiscal years ended 2015 and 2014, we recognized
$22 million and $13 million, respectively, of excess tax benefit from stock-based compensation deductions; this
amount is reported in the financing activities on our Consolidated Statement of Cash Flows.
Summary of Plans and Plan Activity
Equity Incentive Plans
Our 2000 Equity Incentive Plan, as amended, (the “Equity Plan”) allows us to grant options to purchase our
common stock and to grant restricted stock, restricted stock units and stock appreciation rights to our employees,
officers, and directors. Pursuant to the Equity Plan, incentive stock options may be granted to employees and
officers and non-qualified options may be granted to employees, officers, and directors, at not less than 100
percent of the fair market value on the date of grant.
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