Blizzard 2009 Annual Report Download - page 59
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Earnings(Loss)PerCommonShare
Basicearnings(loss)percommonshareiscomputedbydividingincome(loss)availableto
commonshareholdersbytheweightedaveragenumberofcommonsharesoutstandingfortheperiods
presented.Dilutedearningspershareiscomputedbydividingincome(loss)availabletocommon
shareholdersbytheweightedaveragenumberofcommonsharesoutstanding,increasedbytheweighted
averagenumberofcommonstockequivalents.Commonstockequivalentsarecalculatedusingthetreasury
stockmethodandrepresentincrementalsharesissuableuponexerciseofouroutstandingoptions.However,
potentialcommonsharesarenotincludedinthedenominatorofthedilutedearningspersharecalculation
wheninclusionofsuchshareswouldbeantidilutive,suchasinaperiodinwhichanetlossisrecorded.
Earnings(loss)percommonshareforperiodspriortotheBusinessCombinationareretrospectively
adjustedtoreflectthenumberofsplitadjustedsharesreceivedbyVivendi,formerparentcompanyof
VivendiGames.
OnJanuary1,2009,weadoptedthenewaccountingguidancefordeterminingwhether
instrumentsgrantedinsharebasedpaymenttransactionsareparticipatingsecurities,andasaresult,
unvestedsharebasedawardswhichincludetherighttoreceivenonforfeitabledividendsordividend
equivalentsareconsideredtoparticipatewithcommonstockinundistributedearnings.Companiesthat
issuesharebasedawardsconsideredtobeparticipatingsecuritiesarerequiredtocalculatebasicanddiluted
earningspercommonshareamountsunderthetwoclassmethod.Thetwoclassmethodexcludesfrom
earningspercommonsharecalculationsanydividendspaidorowedtoparticipatingsecuritiesandany
undistributedearningsconsideredtobeattributabletoparticipatingsecurities.Theaccountingguidance
requiresretrospectiveapplicationtoallpriorperiodearningspersharedatapresented.Theadoptionofthe
accountingguidancedidnotchangeourbasicordilutedearningspercommonsharefortheyearsended
December31,2008and2007.
StockBasedCompensation
WeaccountforstockbasedcompensationinaccordancewithASCTopic71810,
CompensationStockCompensationandASCSubtopic50550,EquityBasedPaymentstoNonEmployees
(“ASCstockbasedcompensationguidance”).Stockbasedcompensationexpenserecognizedduringthe
requisiteservicesperiodisbasedonthevalueofsharebasedpaymentawardsafterreductionforestimated
forfeitures.Forfeituresareestimatedatthetimeofgrantandarerevised,ifnecessary,insubsequentperiods
ifactualforfeituresdifferfromthoseestimates.Stockbasedcompensationexpenserecognizedinour
consolidatedstatementofoperationsfortheyearsendedDecember31,2009and2008included
compensationexpenseforsharebasedpaymentawardsgrantedbyActivision,Inc.priorto,butnotyet
vestedasofJuly9,2008,basedontherevaluedfairvalueestimatedatJuly9,2008,andcompensation
expenseforthesharebasedpaymentawardsgrantedsubsequenttoJuly9,2008.
Weestimatethevalueofsharebasedpaymentawardsonthemeasurementdateusinga
binomiallatticemodel.Ourdeterminationoffairvalueofsharebasedpaymentawardsonthedateofgrant
usinganoptionpricingmodelisaffectedbyourstockpriceaswellasassumptionsregardinganumberof
highlycomplexandsubjectivevariables.Thesevariablesinclude,butarenotlimitedto,ourexpectedstock
pricevolatilityoverthetermoftheawards,andactualandprojectedemployeestockoptionexercise
behaviors.
PriortotheBusinessCombination,VivendiGameshadequityincentiveplansthatwere
equitysettledandcashsettled.VivendiGamesusedabinomialmodeltoassessthevalueoftheseequity
incentiveawards.EquitysettledawardsincludestockoptionsandrestrictedsharesgrantedbyVivendi,and
thecashsettledawardsincludestockappreciationrightsandrestrictedstockunitsgrantedbybothVivendi
andundertheBlizzardEquityPlan(“BEP”).TheCompanyrecordsaliabilityandrecognizeschangesin
fairvalueoftheliabilitythatoccurduringtheperiodascompensationcostovertherequisiteserviceperiod.
Changesinthefairvalueoftheliabilitythatoccuraftertheendoftherequisiteserviceperiodare
compensationcostoftheperiodinwhichthechangeoccurs.Anydifferencesbetweentheamountfor
whichtheliabilityissettledanditsfairvalueatthesettlementdateasestimatedisanadjustmentof
compensationcostintheperiodofsettlement.SeeNote19ofthenotestoconsolidatedfinancial
statements.