Cricket Wireless 2011 Annual Report Download - page 135

LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
limitation will be removed from deferred tax assets with a corresponding reduction to valuation allowance. Since
the Company currently maintains a full valuation allowance against its federal and state NOL carryforwards, it
does not expect that any possible limitation would have a current impact on its results of operations.
In accordance with the authoritative guidance for business combinations, which became effective for the
Company on January 1, 2009, any reduction in the valuation allowance, including the valuation allowance
established in fresh-start reporting, will be accounted for as a reduction of income tax expense.
The Company’s unrecognized income tax benefits and uncertain tax positions, as well as any associated
interest and penalties, are recorded through income tax expense; however, such amounts have not been
significant in any period. All of the Company’s tax years from 1998 to 2010 remain open to examination by
federal and state taxing authorities. In July 2009, the federal examination of the Company’s 2005 tax year, which
was limited in scope, was concluded and the results did not have a material impact on the consolidated financial
statements.
Note 12. Share-based Compensation
The Company allows for the grant of stock options, restricted stock awards and deferred stock units to
employees, independent directors and consultants under its 2004 Stock Option, Restricted Stock and Deferred
Stock Unit Plan (the “2004 Plan”) and its 2009 Employment Inducement Equity Incentive Plan (the “2009
Plan”). As of December 31, 2011, a total of 9,700,000 aggregate shares of common stock were reserved for
issuance under the 2004 Plan and 2009 Plan, of which 1,872,703 shares of common stock were available for
future awards. Certain of the Company’s stock options and restricted stock awards include both a service
condition and a market condition that relates only to the timing of vesting. These stock options and restricted
stock awards generally vest in full four to five years from the grant date. These awards also provide for the
possibility of annual accelerated performance-based vesting of a portion of the awards if the Company achieves
specified market conditions. In addition, the Company has granted stock options and restricted stock awards that
vest periodically over a fixed term, usually four years. These awards do not contain any market or performance
conditions. The Company’s deferred stock units contain a service and performance condition, which provide for
the possibility of the issuance of underlying shares if the Company achieves specified performance targets. The
shares underlying the deferred stock units generally vest in full approximately three years from the grant date.
Share-based awards also generally provide for accelerated vesting if there is a change in control (as defined in the
2004 Plan and the 2009 Plan) and, in some cases, if additional conditions are met. The stock options are
exercisable for up to ten years from the grant date. Compensation expense is amortized on a straight-line basis
over the requisite service period for the entire award, which is generally the maximum vesting period of the
award, and if necessary, is adjusted to ensure that the amount recognized is at least equal to the vested (earned)
compensation. No share-based compensation expense has been capitalized as part of inventory or fixed assets.
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