eBay 2007 Annual Report Download - page 116

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Stock-Based Compensation
Stock-based compensation expense related to equity awards and employee stock purchases for 2005, 2006 and
2007 was allocated as follows (in thousands, except per share amounts):
2005 2006 2007
Cost of net revenues ................................. $ 1,881 $ 32,981 $ 37,009
Salesandmarketing................................. 8,696 96,547 81,299
Product development................................. 6,468 81,489 76,002
General and administrative ............................ 14,727 106,393 107,503
Total stock-based compensation expense .................. 31,772 317,410 301,813
Tax benefit ........................................ (13,023) (97,572) (92,726)
Stock-based compensation expense, net of tax .............. $18,749 $219,838 $209,087
In general, the stock-based compensation expense for our equity incentive awards are recognized over their
respective vesting periods. Total stock-based compensation costs included in capitalized development costs was
$8.8 million and $8.4 million for the years ended December 31, 2006 and 2007, respectively. There was no stock-
based compensation costs included in capitalized development costs during 2005.
Prior to the adoption of FAS 123(R), the intrinsic value of Skype’s and Shopping.com’s unvested common
stock options assumed in the acquisition was recorded as unearned stock-based compensation. Upon the adoption of
FAS 123(R) in January 2006, the unearned stock-based compensation balance of $45.5 million was reclassified to
additional paid-in capital.
Pro Forma Information for Periods Prior to the Adoption of FAS 123(R)
Pro forma information regarding option grants made to our employees and directors and employee stock
purchases is as follows (in thousands, except per share amounts):
Year Ended
2005
Net income, as reported ................................................ $1,082,043
Add: Amortization of stock-based compensation expense determined under the intrinsic
value method (net of cancellations)...................................... 18,749
Deduct: Total stock-based compensation expense determined under fair value based
method, net of tax .................................................. (248,260)
Pro forma net income ................................................. $ 852,532
Earnings per share:
Basic — Reported .................................................. $ 0.79
—Proforma ................................................. $ 0.63
Diluted — Reported ................................................. $ 0.78
— Pro forma ................................................ $ 0.61
106
eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)