Yahoo 2010 Annual Report Download - page 95

(2) The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected term of
the awards in effect at the time of grant.
(3) The Company estimates the volatility of its common stock at the date of grant based on the implied volatility
of publicly traded options on its common stock, with a term of one year or greater.
(4) The expected life of stock options granted under the Plans is based on historical exercise patterns, which the
Company believes are representative of future behavior. New grants issued by the Company had an expected
life of 4 years in 2008 and 2009 and 4.5 years in 2010. Options assumed in acquisitions had expected lives of
less than 4 years. The expected life of options granted under the Employee Stock Purchase Plan represents
the amount of time remaining in the 24-month offering period.
(5) Assumptions for the Employee Stock Purchase Plan relate to the annual average of the enrollment periods.
Enrollment is currently permitted in May and November of each year.
Restricted stock awards activity for the year ended December 31, 2010 is summarized as follows (in thousands,
except per share amounts):
Shares
Weighted Average
Grant Date Fair Value
Awarded and unvested at December 31, 2009 ............................. 26,189 $21.14
Granted ........................................................... 20,259 $15.65
Assumed .......................................................... 546 $15.55
Vested ............................................................ (8,485) $22.90
Forfeited .......................................................... (7,114) $16.88
Awarded and unvested at December 31, 2010 ......................... 31,395 $17.99
As of December 31, 2010, there was $248 million of unamortized stock-based compensation cost related to
unvested restricted stock awards, which is expected to be recognized over a weighted average period of 2.6 years.
The total fair value of restricted stock awards vested during the years ended December 31, 2008, 2009, and 2010
was $301 million, $375 million, and $195 million, respectively.
During the year ended December 31, 2010, 8.5 million shares subject to previously granted restricted stock
awards and restricted stock units vested. A majority of these vested restricted stock awards and restricted stock
units were net share settled. The Company withheld 3.1 million shares based upon the Company’s closing stock
price on the vesting date to settle the employees’ minimum statutory obligation for the applicable income and
other employment taxes. The Company then remitted cash to the appropriate taxing authorities.
Total payments for the employees’ tax obligations to the relevant taxing authorities were $49 million for the year
ended December 31, 2010 and are reflected as a financing activity within the consolidated statements of cash
flows. The payments were used for tax withholdings related to the net share settlements of restricted stock units.
The payments had the effect of share repurchases by the Company as they reduced the number of shares that
would have otherwise been issued on the vesting date and were recorded as a reduction of additional paid-in
capital.
In the year ended December 31, 2008, the Company reversed an amount of $51 million of stock-based
compensation expense related to unvested stock awards as a result of an increase in its estimated forfeiture rate
assumption based on updated information on actual forfeitures.
In 2008, 2009, and 2010, $125 million, $108 million, and $131 million, respectively, of excess tax benefits from
stock-based awards for options exercised in current and prior periods were included as a source of cash flows
from financing activities. These excess tax benefits represent the reduction in income taxes otherwise payable
during the period, attributable to the actual gross tax benefits in excess of the expected tax benefits for options
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