Experian 2009 Annual Report Download - page 122

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120 Experian Annual Report 2009
27. Share-based payment arrangements (continued)
(ii) Information relating to option valuation techniques
For the above plans the Black-Scholes model is used to determine an appropriate value of the option grants and inputs into
the model are calculated as follows:
Expected volatility
– Calculated as an average over the expected life with an assumption made for volatility in each year of the
expected life. Volatility in the rst year is assumed to be the same as implied volatility on grant date. Volatility for year 4 and
beyond is assumed to remain at the long run historic volatility. Linear interpolation is assumed for years 2 and 3.
Expected dividend yield
– Yields are based on the current consensus analyst forecast gures at the time of grant. The inputs
utilised are an average of the forecast over the next three nancial years.
Risk-free rate
– Rates are obtained from the UK Government Debt Management Ofce website which details historical prices
and yields for gilt strips.
Expected option life to exercise:
Experian plans
- Options under the Experian Share Option Plan vest 50% after 3 years and
50% after 4 years. The expected life is 4 years for the 50% that vest after 3 years and 4.85 years for the 50% that vest after 4 years.
Options under the Experian Sharesave Plans have expected lives of either 3 or 5 years.
Expected option life to exercise: former GUS plans
- Options under The 1998 Approved and Non-Approved Executive Share
Option Schemes had expected lives of 4 years, The North America Stock Option Plan had an expected life of 3.75 years and
the savings related share option plans had expected lives of either 3 or 5 years.
Share price on grant date
- The closing price on the day the options were granted.
Option exercise price
- Exercise price as stated in the terms of each award.
(iii) Weighted average estimated fair values and the inputs into the Black-Scholes models – Experian plans
Arrangements Experian Share Option Plan Experian Sharesave Plans
2009 2008 2009 2008
Share price on grant date (£) 3.29 5.30 3.65 5.83
Exercise price (£) 3.29 5.22 2.91 4.72
Expected volatility 45.2% 29.5% 36.0% 26.7%
Expected dividend yield 3.8% 3.6% 3.0% 3.8%
Risk-free rate 3.1% 5.2% 5.1% 5.7%
Expected option life to exercise 3.5 years 3.6 years 3.8 years 3.3 years
Fair value (£) 0.92 1.08 1.26 1.58
Notes to the Group nancial statements continued
Financial statements