TomTom 2005 Annual Report Download - page 83
Download and view the complete annual report
Please find page 83 of the 2005 TomTom annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.83
Calculationofvalueofshareoptionsondateofgrant
ThefairvalueoftheoptionsgrantedisdeterminedbytheBlackandScholesmodel.Thismodelistheprescribedmodel
baseduponIFRS2“Share-basedPayments”.TheBlackandScholesmodelcontainstheinputvariablesincludingthe
risk-freeinterestrate,volatilityoftheunderlyingshareprice,exercisepriceandsharepriceatthedateofgrant.Thefair
valuecalculatedisallocatedtothethreeyearvestingperiod,usingthestraight-linemethod.
TheinputintotheBlackandScholesmodelisasfollows: 2004 2005
Weightedaverageshareprice(in
) 1.22
1
28.58
Weightedaverageexerciseprice(in
) 1.03
1
28.22
Weightedaverageexpectedvolatility 35.00% 38.75%
Weightedaverageexpectedlife 60months 68months
Weightedaverageriskfreerate 3.46% 3.04%
Expecteddividends Zero Zero
Volatilityisdeterminedusingindustrybenchmarkingforlistedpeergroupcompanies.Thesharepriceonthedateofgrant
foroptionsgrantedaftertheIPOisdeterminedasthethreedayaverageofthestockpricepriortothedateofthegrant.
PriortotheIPO,thesharepricewasdeterminedbymanagementusingadiscountedcashflowmodel.
TheBlackandScholesoptionvaluationmodelwasdevelopedforuseinestimatingthefairvalueoftradedoptionswhich
havenovestingrestrictionsandarefullytransferable.Inaddition,optionvaluationmodelsrequiretheinputofhighly
subjectiveassumptions,includingtheexpectedstockpricevolatility.TheCompany’semployeestockoptionshave
characteristicssignificantlydifferentfromthoseoftradedoptions,andchangesinthesubjectiveinputassumptionscan
materiallyaffectthefairvalueestimate.
1
Theweightedaveragesharepriceandtheweightedaverageexercise
pricefortheyearended31December2004havebeencomputedona
pro-formabasisassumingthechangeinthenumberofshares
outstandingto100millionshareshadbeeneffectiveforallof2004.