Costco 2008 Annual Report Download - page 76

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Summary of Stock-Based Compensation
The following table summarizes stock-based compensation and the related tax benefits under the
Company’s plans:
2008 2007 2006
Restricted stock units ................................. $ 97,460 $ 51,626 $ 4,924
Stock options ....................................... 68,645 82,956 102,473
Incremental expense related to modification of certain stock
options ........................................... — 8,072 —
Total stock-based compensation expense before income
taxes ............................................ 166,105 142,654 107,397
Income tax benefit ................................... (54,969) (47,096) (34,288)
Total stock-based compensation expense, net of income
tax .............................................. $111,136 $ 95,558 $ 73,109
The remaining unrecognized compensation cost related to non-vested RSUs at August 31, 2008, was
$296,755, and the weighed-average period of time over which this cost will be recognized is 3.6 years.
The remaining unrecognized compensation cost related to unvested stock options at August 31, 2008,
was $70,076, and the weighted-average period of time over which this cost will be recognized is 1.4
years.
Note 7—Retirement Plans
The Company has a 401(k) Retirement Plan that is available to all U.S. employees who have
completed 90 days of employment. For all U.S. employees, with the exception of California union
employees, the plan allows pre-tax deferrals against which the Company matches 50% of the first one
thousand dollars of employee contributions. In addition, the Company provides each eligible participant
an annual contribution based on salary and years of service.
California union employees participate in a defined benefit plan sponsored by their union. The
Company makes contributions based upon its union agreement. For all the California union
employees, the Company-sponsored 401(k) plan currently allows pre-tax deferrals against which the
Company matches 50% of the first five hundred dollars of employee contributions. In addition, the
Company will provide each eligible participant a contribution based on hours worked and years of
service.
The Company has a defined contribution plan for Canadian and United Kingdom employees and
contributes a percentage of each employee’s salary. The Company complies with government
requirements related to retirement benefits for other international operations and accrues expenses
based on a percentage of each employee’s salary as appropriate.
Amounts expensed under all plans were $271,576, $238,826 and $233,595 for 2008, 2007 and 2006,
respectively. The Company has defined contribution 401(k) and retirement plans only, and thus has no
liability for post-retirement benefit obligations.
Note 8—Income Taxes
Effective September 3, 2007, the Company adopted FIN 48, which clarified the accounting for
uncertainty in income taxes recognized in financial statements. FIN 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure and transition.
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