ADP 2008 Annual Report Download - page 57

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The fair value for stock options granted was estimated at the date of grant with the following assumptions:
(a) The weighted average fair values were adjusted to reflect the impact of the spin-off of Broadridge.
B. Pension Plans. The Company has a defined benefit cash balance pension plan covering substantially all U.S. employees, under which
employees are credited with a percentage of base pay plus interest. The plan interest credit rate will vary from year-to-year based on the ten-
year U.S. Treasury rate. Employees are fully vested on completion of three years of service. The Company's policy is to make contributions
within the range determined by generally accepted actuarial principles. In addition, the Company has various retirement plans for its non-U.S.
employees and maintains a Supplemental Officer Retirement Plan (“SORP”). The SORP is a defined benefit plan pursuant to which the
Company will pay supplemental pension benefits to certain key officers upon retirement based upon the officers’ years of service and
compensation.
A June 30 measurement date was used in determining the Company’ s benefit obligations and fair value of plan assets.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans —
an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS No. 158”). This statement requires a company to (a) recognize in its
statement of financial position an asset for a plan’ s overfunded status or a liability for a plan’ s underfunded status, (b) measure a plan’ s assets
and its obligations that determine its funded status as of the end of the employer’ s fiscal year, and (c) recognize changes in the funded status of
a defined benefit plan in the year in which the changes occur (reported in comprehensive income). The requirement to recognize the funded
status of a benefit plan and the related disclosure requirements were effective for the Company as of the end of fiscal 2007 and the Company
adopted the statement at that time. The adoption of SFAS No. 158 resulted in a $63.1 million reduction, net of income taxes, in stockholders’
equity.
57
Years ended June 30, 2008 2007 2006
Risk-free interest rate 2.8% - 4.6% 4.6% - 5.0% 4.0% - 4.6%
Dividend yield 1.7% - 2.7% 1.6% - 1.7% 1.4% - 1.7%
Weighted average volatility factor 22.8% - 25.6% 18.4% - 24.7% 17.1% - 24.7%
Weighted average expected life (in years):
Stock options 5.0 4.9 - 5.6 5.5 - 5.6
Stock purchase plan 2.0 2.0 2.0
Weighted average fair value (in dollars):
Stock options (a) $ 8.31 $ 10.77 $ 9.92
Stock purchase plan (a) $11.99 $11.24 $8.89