Blackberry 2009 Annual Report Download - page 26

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 FEBRUARY 28, 2009
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with the Restatement, the issues surrounding past stock
option grants and financial statement restatements are
complex and guidance in these areas may continue to evolve.
If new guidance imposes additional or different requirements
or if the SEC or the OSC disagrees with the manner in which
the Company has accounted for and reported the financial
impact, there is a risk the Company may have to further
restate its prior financial statements, amend its filings with
the SEC or the OSC (including the Consolidated Financial
Statements and this MD&A), or take other actions not
currently contemplated.
The Company has a Restricted Share Unit Plan (the “RSU
Plan”) under which eligible participants include any officer or
employee of the Company or its subsidiaries. The RSU Plan
was approved at the Company’s Annual General Meeting
on July 18, 2005 and received regulatory approval in August
2005. Restricted Share Units (“RSUs”) are redeemed for
either common shares issued by the Company, common
shares purchased on the open market or the cash equivalent
on the vesting dates established by the Company. The
compensation expense is calculated based on the fair value
of the equity award as defined in SFAS 123(R) and the amount
is recognized over the vesting period of the RSU.
The Company has a Deferred Share Unit Plan (the “DSU
Plan”), adopted by the Board of Directors on December 20,
2007, under which each independent director will be credited
with Deferred Share Units (“DSUs”) in satisfaction of all or
a portion of the cash fees otherwise payable to them for
serving as a director of the Company. Grants under the DSU
plan replace the stock option awards that were historically
granted to independent members of the Board of Directors.
After such a director ceases to be a director, DSUs will be
redeemed for cash with the redemption value of each DSU or,
at the Company’s option and subject to receipt of shareholder
approval, by way of shares purchased on the open market or
issued by the Company. DSUs are accounted for as liability-
classified awards under the provisions of SFAS 123(R).
For further details on the Company’s stock-based
compensation, refer to Note 11 of the Consolidated Financial
Statements.
Impact of Accounting Pronouncements Not Yet
Implemented
Business Combinations
In December 2007, the FASB issued SFAS 141(R) Business
Combinations (“SFAS 141(R)”). SFAS 141(R) replaces SFAS 141
Business Combinations (“SFAS 141”). SFAS 141(R) is broader
in scope than SFAS 141 which applied only to business
arrangements in the ordinary course of business in which
the tax treatment is not entirely certain. In particular,
certain countries in which it operates could seek to tax a
greater share of income than has been provided. The final
outcome of any audits by taxation authorities may differ
from estimates and assumptions used in determining the
Company’s consolidated tax provision and accruals, which
could result in a material effect on the consolidated income
tax provision and the net income for the period in which such
determinations are made.
Stock-Based Compensation
The Company has an incentive stock option plan for directors,
officers and employees of the Company or its subsidiaries.
No stock options were granted to independent directors in
fiscal 2009.
The Company records stock-based compensation expense
in accordance with SFAS 123(R), Share-Based Payment
(“SFAS 123(R)”). Under the provisions of SFAS 123(R), stock-
based compensation expense is estimated at the grant
date based on the award’s fair value as calculated by the
Black-Scholes-Merton (“BSM”) option-pricing model and
is recognized rateably over the vesting period. The BSM
model requires various judgmental assumptions including
volatility and expected option life. In addition, judgment is
also applied in estimating the amount of share-based awards
that are expected to be forfeited, and if actual results differ
significantly from these estimates, stock-based compensation
expense and our results of operations would be impacted.
Prior to fiscal 2007, the Company accounted for stock-
based compensation using Accounting Principles Board
No. 25 Accounting for Stock Issued to Employees (“APB 25”)
and related interpretations. Under APB 25, compensation
expense is measured as of the date on which the number
of shares subject to the option and exercise price becomes
fixed. Generally, this occurs on the grant date and the award
is accounted for as a fixed award. If the number of shares
subject to the option and grant price are not fixed as of the
grant date, the stock option is accounted for as a variable
award until such time as the number of shares subject to the
option and/or exercise prices becomes fixed, or the stock
option is exercised, is cancelled, or expires.
In connection with the stock option review and the
restatement of prior year financial statements, the
Company has applied judgment in choosing whether
to revise measurement dates for prior option grants
described below under “Restatement of Previously Issued
Financial Statements”. While the Company believes it has
made appropriate judgments in determining the correct
measurement dates for its stock option grants in connection