Symantec 2007 Annual Report Download - page 42

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period prior to finding a sub-lessee. Market conditions may affect our ability to sublease facilities on terms
consistent with our estimates. Our ability to sublease facilities on schedule or to negotiate lease terms resulting in
higher or lower sublease income than estimated may affect our accrual for site closures. In addition, differences
between estimated and actual related broker commissions, tenant improvements, and related exit costs may increase
or decrease our accrual upon final negotiation. If we made different estimates regarding these various components
of our excess facilities costs, the amount recorded for any period presented could vary materially from those
actually recorded.
Stock-based Compensation
Effective April 1, 2006, we adopted the provisions of, and accounted for stock-based compensation in
accordance with, SFAS No. 123R. Under SFAS No. 123R, we must measure the fair value of all stock-based awards,
including stock options, restricted stock units, or RSUs, and purchase rights under our employee stock purchase
plan, or ESPP, on the date of grant and amortize the fair value of the award over the requisite service period. We
elected the modified prospective application method, under which prior periods are not revised for comparative
purposes. The valuation provisions of SFAS No. 123R apply to new awards and to awards that were outstanding as
of the effective date and are subsequently modified. For stock-based awards granted on or after April 1, 2006, we
recognize stock-based compensation expense on a straight-line basis over the requisite service period, which is
generally the vesting period. We also recognize estimated compensation expense for the unvested portion of awards
that were outstanding as of the effective date on a straight-line basis over the remaining service period using the
compensation costs estimated for the SFAS No. 123 pro forma disclosures.
We currently use the Black-Scholes option-pricing model to determine the fair value of stock options. The
determination of the fair value of stock-based awards on the date of grant using an option-pricing model is affected
by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables
include our expected stock price volatility over the term of the awards, actual and projected employee stock option
exercise behaviors, risk-free interest rates, and expected dividends.
We estimate the expected life of options granted based on an analysis of our historical experience of employee
exercise and post-vesting termination behavior considered in relation to the contractual life of the option. Expected
volatility is based on the average of historical volatility for the period commensurate with the expected life of the
option and the implied volatility of traded options. The risk free interest rate is equal to the U.S. Treasury constant
maturity rates for the period equal to the expected life. We do not currently pay cash dividends on our common stock
and do not anticipate doing so in the foreseeable future. Accordingly, our expected dividend yield is zero. We are
required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual
forfeitures differ from those estimates. We estimate forfeitures of options, RSUs, and ESPP purchase rights at the
time of grant based on historical experience and record compensation expense only for those awards that are
expected to vest. All stock-based awards are amortized on a straight-line basis over the requisite service periods of
the awards, which are generally the vesting periods.
If factors change and we employ different assumptions for estimating stock-based compensation expense in
future periods or if we decide to use a different valuation model, the amount of such expense recorded in future
periods may differ significantly from what we have recorded in the current period.
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options
that have no vesting restrictions and are fully transferable, characteristics not present in our option grants. Existing
valuation models, including the Black-Scholes and lattice binomial models, may not provide reliable measures of
the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of the fair values of
our stock-based compensation awards on the grant dates may bear little resemblance to the actual values realized
upon the exercise, expiration, early termination, or forfeiture of those stock-based payments in the future. Certain
stock-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic
value as compared to the fair values originally estimated on the grant date and reported in our financial statements.
Alternatively, value may be realized from these instruments that is significantly higher than the fair values
originally estimated on the grant date and reported in our financial statements.
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