Buffalo Wild Wings 2014 Annual Report Download - page 52

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The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option valuation
model with the following assumptions:
Stock Options
December 28,
2014 December 29, 2013 December 30, 2012
Expected dividend yield 0.0% 0.0% 0.0%
Expected stock price volatility 35.7% 48.5% 53.6%
Risk-free interest rate 1.7% 0.8% 1.1%
Expected life of options 5 5 5
Employee Stock Purchase Plan
December 28,
2014 December 29, 2013 December 30, 2012
Expected dividend yield 0.0% 0.0% 0.0%
Expected stock price volatility 45.5 — 45.9% 46.4 — 47.2% 48.1 — 48.7%
Risk-free interest rate 0.05% 0.08% 0.15%
Expected life of options 0.5 0.5 0.5
The expected term of the options represents the estimated period of time until exercise and is based on historical
experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future
employee behavior. Expected stock price volatility is based on historical volatility of our stock. The risk-free interest rate is
based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. We have not paid
dividends in the past.
(x) New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09
“Revenue with Contracts from Customers.” ASU 2014-09 supersedes the current revenue recognition guidance, including
industry-specific guidance. The guidance introduces a five-step model to achieve its core principal of the entity recognizing
revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The updated guidance is effective for interim and annual periods
beginning after December 15, 2016 and early adoption is not permitted. We are currently evaluating the impact of the updated
guidance but we do not believe the adoption of ASU 2014-09 will have a significant impact on our consolidated financial
statements.
We reviewed all other significant newly-issued accounting pronouncements and concluded that they either are not
applicable to our operations or that no material effect is expected on our consolidated financial statements as a result of future
adoption.
(2) Fair Value Measurements
The guidance for fair value measurements establishes the authoritative definition of fair value, sets out a framework for
measuring fair value, and outlines the required disclosures regarding fair value measurements. Fair value is the price that would
be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants at the measurement date. We use a three-tier fair value
hierarchy based upon observable and non-observable inputs as follows:
• Level 1 – Observable inputs such as quoted prices in active markets;
• Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
• Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its
own assumptions.