Dell 2007 Annual Report Download - page 61

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock-Based Compensation — At February 1, 2008, Dell has stock-based compensation plans and an employee stock purchase plan with
outstanding stock or stock options; however, Dell discontinued the employee stock purchase plan effective February 2, 2008, as part of an
overall assessment of its benefits strategy.
Effective February 4, 2006, Dell adopted SFAS 123(R) using the modified prospective transition method which does not require revising
the presentation in prior periods for stock-based compensation. Under this transition method, stock-based compensation expense for
Fiscal 2008 and Fiscal 2007 includes compensation expense for all stock-based compensation awards granted prior to February 4, 2006,
but not yet vested at February 3, 2006, based on the grant date fair value estimated in accordance with the original provisions of
SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). Stock-based compensation expense for all stock-based
compensation awards granted after February 3, 2006 is based on the grant-date fair value estimated in accordance with the provisions of
SFAS 123(R). Dell recognizes this compensation expense net of an estimated forfeiture rate over the requisite service period of the
award, which is generally the vesting term of three to five years for stock options and restricted stock awards. In March 2005, the United
States Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 107 ("SAB 107") regarding the SEC's
interpretation of SFAS 123(R) and the valuation of share-based payments for public companies. Dell has applied the provisions of
SAB 107 in its adoption of SFAS 123(R). See Note 5 of Notes to Consolidated Financial Statements for further discussion of stock-based
compensation.
Prior to the adoption of SFAS 123(R), Dell measured compensation expense for its employee stock-based compensation plan using the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB
25"). Dell applied the disclosure provisions of SFAS 123 such that the fair value of employee stock-based compensation was disclosed in
the notes to its financial statements. Under APB 25, when the exercise price of Dell's employee stock options equaled the market price of
the underlying stock at the date of the grant, no compensation expense was recognized.
Recently Issued Accounting Pronouncements — In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS 157"), which defines fair value, provides a framework for measuring fair value, and expands the disclosures required for assets
and liabilities measured at fair value. SFAS 157 applies to existing accounting pronouncements that require fair value measurements; it
does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and is
required to be adopted by Dell beginning in the first quarter of Fiscal 2009. Management is currently evaluating the impact that
SFAS 157 may have on Dell's results of operations, financial position, and cash flows and does not expect the impact to be material.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"),
which provides companies with an option to report selected financial assets and liabilities at fair value with the changes in fair value
recognized in earnings at each subsequent reporting date. SFAS 159 provides an opportunity to mitigate potential volatility in earnings
caused by measuring related assets and liabilities differently, and it may reduce the need for applying complex hedge accounting
provisions. If elected, SFAS 159 is effective for fiscal years beginning after November 15, 2007, which is Dell's Fiscal 2009.
Management is currently evaluating the impact that this statement may have on Dell's results of operations and financial position and has
yet to make a decision on the elective adoption of SFAS 159.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations ("SFAS 141(R)"). SFAS 141(R) requires that the
acquisition method of accounting be applied to a broader set of business combinations and establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, any
noncontrolling interest in the acquiree, and the goodwill acquired. SFAS 141(R) also establishes the disclosure requirements to enable the
evaluation of the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years beginning after
December 15, 2008 and is required to be adopted by Dell beginning in the first quarter of Fiscal 2010. Management is currently
evaluating the impact that SFAS 141(R) may have on Dell's results of operations, financial position, and cash flows.
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