Blackberry 2015 Annual Report Download - page 83

BlackBerry Limited
Notes to the Consolidated Financial Statements
In millions of United States dollars, except share and per share data, and except as otherwise indicated
8
The Equity Incentive Plan (the “Equity Plan”) was adopted during fiscal 2014 and replaced the Company’s previous
Equity Incentive Plan and Restricted Share Unit Plan (the “Prior Plans”). Awards previously granted under the Prior Plans
continue to be governed by the terms of the Prior Plans and by any amendments approved by the Company's Board of
Directors (the “Board”). The Equity Plan provides for the grants of incentive stock options and restricted share units
(“RSUs”) to officers and employees of the Company or its subsidiaries. The number of common shares authorized under
the Equity Plan was 13,375,000 calculated at March 2, 2013. Any shares that are subject to options granted after fiscal
2013 are counted against this limit as 0.625 share for every one option granted, and any shares that are subject to RSUs
granted after fiscal 2013 are counted against this limit as one share for every RSU. Awards previously granted under the
Prior Plans and the Equity Plan that expire or are forfeited, or settled in cash, are added to the shares available under the
Equity Plan. Options forfeited will be counted as 0.625 shares to the shares available under the Equity Plan. Shares issued
as awards other than options (i.e., RSUs) that expire or are forfeited, settled in cash or sold to cover withholding tax
requirements are counted as one share added to the shares available under the Equity Plan. In addition to awards under
the Equity Plan, 10,521,418 RSUs were granted to Mr. Chen as an inducement to enter into a contract of full-time
employment.
The Company measures stock-based compensation expense for options at the grant date based on the award’s fair value as
calculated by the Black-Scholes-Merton (“BSM”) option-pricing model for stock options and the expense 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 number of stock-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.
Any consideration paid by employees on exercise of stock options plus any recorded stock-based compensation within
additional paid-in capital related to that stock option, is credited to capital stock.
At the Company’s discretion, RSUs are redeemed for either common shares issued by the Company, common shares
purchased on the open market by a trustee selected by the Company, or the cash equivalent on the vesting dates
established by the Board or the Compensation, Nomination and Governance Committee of the Board. The RSUs
generally vest over a three-year period, either on the third anniversary date, in equal installments or 25% per year in years
one and two and 50% in year three, 50% in year two and three or over a five-year period, 25% per year in year three and
four and 50% in year five on each anniversary date over the vesting period. The Company classifies RSUs as equity
instruments as the Company has the ability and intent to settle the awards in common shares. The compensation expense
for standard RSUs is calculated based on the fair value of each RSU as determined by the closing value of the Company’s
common shares on the business day of the grant date. The Company recognizes compensation expense over the vesting
period of the RSU.
Upon vesting of RSUs, new common shares will be issued by the Company from treasury.
The Company has a Deferred Share Unit Plan (the “DSU Plan”), originally approved by the Board on December 20, 2007,
under which each independent director is 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. At a minimum, 60% of each
independent director’s annual retainer will be satisfied in the form of DSUs. After his or her first year of service, a director
can elect to receive the remaining 40% in any combination of cash and DSUs. Within a specified period after such a
director ceases to be a director, DSUs will be redeemed for cash with the redemption value of each DSU equal to the
weighted average trading price of the Company’s shares over the five trading days preceding the redemption date.
Alternatively, the Company may elect to redeem DSUs by way of shares purchased on the open market or issued by the
Company.
DSUs are accounted for as liability-classified awards and are awarded on a quarterly basis. These awards are measured at
their fair value on the date of issuance and re-measured at each reporting period until settlement.
Advertising costs
The Company expenses all advertising costs as incurred. These costs are included in selling, marketing and
administration.
2. ADOPTION OF ACCOUNTING POLICIES
In April 2014, the Financial Accounting Standards Board (the “FASB”) issued a new accounting standards update on the
topic of reporting discontinued operations and disclosures of disposals of components of an entity. The amendments
change the requirements for reporting discontinued operations by limiting discontinued operations reporting to disposals