Siemens 2006 Annual Report Download - page 215

Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts) 211
27 Stock-based compensation
As of October 1, 2005, the Company adopted Statement of Financial Accounting Standards
(SFAS) 123 (revised 2004) Share-Based Payment (SFAS 123R), which replaces SFAS 123,
Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations. SFAS 123R requires companies to
recognize stock-based compensation expense, with certain limited exceptions, based on fair
value. The adoption of SFAS 123R, including the remeasurement to fair value of liability classi-
fied awards, did not have a material effect on the Company’s Consolidated Financial State-
ments, due primarily to the adoption of the fair value measurement provisions of SFAS 123 on
October 1, 2003 for which the prospective method was applied.
Total stock-based compensation cost recognized in net income amounted to €56 and €60
for the years ended September 30, 2006 and 2005, respectively. The total income tax benefit
recognized in the income statement for stock-based compensation was €35 and €38 in fiscal
2006 and 2005, respectively.
I. Equity settled awards
Cash received from stock option exercises and from the Company’s employee share purchase
plan for the years ended September 30, 2006 and 2005 amounts to €313 and €173, respectively.
Stock Option Plans
Description of plans – 1999 Siemens Stock Option Plan
As part of a stock option plan for members of the Managing Board, key executives and other
eligible employees, the Company’s shareholders authorized the Managing Board on February
18, 1999 to distribute non-transferable options exercisable for up to an aggregate of 10 million
common shares. The authority to distribute options under this plan would have originally
expired on February 18, 2004. With the ratification by Siemens shareholders of the 2001
Siemens Stock Option Plan (further details see below), the 1999 Siemens Stock Option Plan
(the 1999 Plan) has been replaced and no further options under this plan have been granted.
Under the 1999 Plan, the exercise price is equal to the average market price of Siemens’
stock during the five days preceding the date the options were granted. The options are exer-
cisable within the five years following a holding period of two years if Siemens AG stock price
outperforms the Dow Jones Stoxx-Index by at least two percentage points on five consecutive
days. This percentage applies to the first year of the five-year option exercise period, and
increases by 0.5 percentage points in each subsequent year. As a result of such performance
requirements, the plan has been accounted for as a variable plan under APB Opinion No. 25.
The terms of the plan allow the Company, at its discretion upon exercise of the option, to
offer optionees settlement of the options in either newly issued shares of common stock of
Siemens AG from the Conditional Capital reserved for this purpose, treasury stock or cash.
The alternatives offered to optionees are determined by the Managing Board in each case as
approved by the Supervisory Board. Compensation in cash is equal to the difference between
the exercise price and the average market price of the Company’s stock on the five trading
days preceding the exercise of the stock options.
Notes to Consolidated Financial Statements