General Motors 2010 Annual Report Download - page 160

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Stock Incentive Plans
GM
We measure and record compensation expense for all share-based payment awards based on the award’s estimated fair value. We
grant awards to our employees through the 2009 Long Term Incentive Plan and the GM Salary Stock Plan. We record compensation
expense over the applicable vesting period of an award.
In November and December 2010 we consummated a public offering of 550 million shares of our common stock. Prior to this
offering, the fair value of awards granted was based on the estimated fair value of our common stock. Commencing in November
2010 the fair value of our common stock is based on the New York Stock Exchange trading price. Refer to Note 31 for additional
information regarding stock incentive plans.
Salary stock awards granted are fully vested and nonforfeitable upon grant, therefore compensation cost is recorded on the date of
grant.
Old GM
All of Old GM’s awards for the period January 1, 2009 through July 9, 2009, and the year ended December 31, 2008 were
accounted for at fair value, and compensation expense was recorded based on the award’s estimated fair value. No share-based
compensation expense was recorded for the top 25 most highly compensated employees in 2009, in compliance with the Loan and
Security Agreement with the UST.
Stock options granted were measured on the date of grant using the Black-Scholes option-pricing model to determine fair value.
Compensation expense was recorded on a graded vesting schedule. Old GM issued treasury shares upon exercise of employee stock
options.
Option awards contingent on performance and market conditions were measured on the date of grant using a Monte-Carlo
simulation model to determine fair value. Vesting was contingent upon a one-year service period and multiple performance and
market requirements and was recorded on a graded vesting schedule over a weighted-average derived service period.
Market condition based cash-settled awards were granted to participants based on a minimum percentile ranking of Old GM’s total
stockholder return compared to all other companies in the S&P 500 for the same performance period. The fair value of each market
condition based cash-settled award was estimated on the date of grant, and for each subsequent reporting period, remeasured using a
Monte-Carlo simulation model that used multiple input variables.
Cash restricted stock units were granted to certain of Old GM’s global executives that provided cash equal to the value of
underlying restricted share units at predetermined vesting dates. Compensation expense was recorded on a straight-line basis over the
requisite service period for each separately vesting portion of the award. The fair value of each cash-settled award was remeasured at
the end of each reporting period, and the liability and related expense adjusted based on the new fair value of Old GM’s common
stock.
All outstanding Old GM awards remained with Old GM and we did not replace them in the 363 Sale.
Recently Adopted Accounting Principles
Variable Interest Entities
In January 2010 we adopted amendments to ASC 810, “Consolidation” (ASC 810). These amendments require an enterprise to
qualitatively assess the determination of the primary beneficiary of a VIE based on whether the enterprise: (1) has the power to direct
158 General Motors Company 2010 Annual Report