Blackberry 2007 Annual Report Download - page 20

18
RESEARCH IN MOTION LIMITED
management’s discussion and analysis of financial
condition and results of operations continued
FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 3, 2007
(2) an allocation of all unrealized gains for unexercised stock
options based on the stock’s trading price at each reporting
period. The application of variable plan accounting causes
significant fluctuations in the accounting expense/recovery
when the Company’s share price is experiencing periods of
high volatility. The accounting impact for the restatement
adjustments related to the variable plan accounting is set out
in the table above.
(2) Share-Based Awards Granted Prior to the Stock Option Plan
Prior to the IPO and the Company’s adoption of the Stock
Option Plan, the Company issued 444,000 restricted Class A
Common Shares at a price of CAD $0.05 per share pursuant
to employee stock agreements and 1,306,000 options to
acquire shares at an exercise price of CAD $0.05 under
an employee stock plan (such agreements and such plan,
together, the “Pre-IPO Plans”). The terms of both awards
provided that employees could “put” the shares back to the
Company for per share book value while the Company was
private and for fair value when the Company became public.
Due to the put feature, under U.S. GAAP, the Company
was required to account for these awards under variable
plan accounting. Upon adoption of the Stock Option Plan
in 1996, all previously unexercised options under the Pre-
IPO Plans became subject to the terms and conditions of
the Stock Option Plan. As such, the awards issued under
the Pre-IPO Plans continued to be accounted for under
variable plan accounting subsequent to the Company’s IPO
as they were then subject to the “net settlement” feature as
described above. The accounting impact for the restatement
adjustment related to the stock based awards issued under
the Pre-IPO Plans is set out in the table above.
(3) Misapplication of the Determination of an Appropriate
Accounting Measurement Date
As a result of the Review, it has been determined that, in
many cases, incorrect measurement dates were used for
financial accounting purposes for certain stock option
grants in prior periods. For options issued prior to
February 27, 2002, the determination of an appropriate
accounting measurement date does not impact the restated
accounting expense as all options issued prior to that date
are accounted for under variable plan accounting. For this
reason, separate disclosure is made of errors in measurement
dates made pre- and post-February 27, 2002. The
determination of the appropriate measurement dates for the
period prior to February 27, 2002 does, however, impact the
Company’s restated pro forma stock-based compensation
disclosures under SFAS 123, as set out in the notes to the
Consolidated Financial Statements.
Consistent with the accounting literature and recent
guidance from the staff of the SEC, the Special Committee
undertook a process to categorize, based on grant type, each
option granted by the Company. The Special Committee
analyzed the evidence related to each grant and, based on
the relevant facts and circumstances, applied the accounting
standards to determine an appropriate measurement date
for each grant. Where the measurement date was found
to not be the originally assigned grant date, an accounting
adjustment was determined to account for the stock-
based compensation expense. The results of the work
conducted by the Special Committee were provided to the
Board of Directors, and the findings and the accounting
adjustments have been reviewed by and accepted by the
Company. Hereafter, reference to the Company’s actions and
determinations includes the actions and determinations of
the Special Committee.
For the purposes of identifying a measurement date
with finality for grants of options to persons other than the
C-level officers, the Company looked to objective evidence
supporting the approval of the number and exercise price
of an option. In each instance, the Company looked for
approval from the highest-ranking individual involved with
the grant. In many cases, this would include Mr. Balsillie
or Mr. Kavelman. In some instances, it would include
other employees of the Company. Additionally, in certain
instances, the Company’s plan administrators looked for
input and approval from other high ranking employees.
In these instances, approval was not considered to be
determined with finality until these other individuals had
provided their approval.
The Company has determined that for the majority of
option grants, sufficient objective evidence does exist to
support the determination of appropriate measurement
dates. The Company has aggregated grants into the
following general types: