Symantec 2012 Annual Report Download - page 155

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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
This guidance prescribes a two-step process to determine the amount of tax benefit to be recognized. The
first step is to evaluate the tax position for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be sustained on audit, including resolution of related
appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the
largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and
subjective to estimate such amounts, as this requires us to determine the probability of various possible
outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors
including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues
under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition
of a tax benefit or an additional charge to the tax provision in the period.
Stock-based compensation
Stock-based compensation is measured at the grant date based on the fair value of the award and is
recognized as expense ratably on a straight-line basis over the requisite service period, which is generally the
vesting period of the respective award. No compensation cost is ultimately recognized for awards for which
employees do not render the requisite service and are forfeited.
Fair value of stock-based awards. We have four types of stock-based awards: stock options, restricted
stock units, restricted stock awards, and performance-based restricted stock units.
•Stock options. We use the Black-Scholes option-pricing model to determine the fair value of stock
options. The determination of the grant date fair value of options 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 expected life of the awards,
actual and projected employee stock option exercise and cancellation 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.
•Restricted stock units and restricted stock awards. The fair value of each Restricted Stock Unit (“RSU”)
and Restricted Stock Award (“RSA”) is equal to the market value of Symantec’s common stock on the
date of grant.
•Performance-based restricted stock unit. We use the Monte Carlo simulation model to determine the
fair value of each performance-based restricted stock unit (“PRU”). The determination of the grant date
fair value of PRUs using a simulation 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 expected life of the awards, risk-free interest rates and expected dividends. Expected
volatility is based on the average of historical volatility for the period commensurate with the expected
life of the PRUs. 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.
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