Intel 2006 Annual Report Download - page 72

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation
of FASB Statement No. 109” (FIN 48). The interpretation contains a two-step approach to recognizing and measuring
uncertain tax positions accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” The first step is to
evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than
not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The
second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate
settlement. The company is still assessing the impacts of the adoption of FIN 48. Based on a preliminary analysis,
management believes that adoption will result in recording an increase to retained earnings of between $150 million and
$300 million in the first quarter of 2007. However, the final analysis will be completed in the first quarter of 2007.
In June 2006, the FASB ratified the EITF consensus on EITF Issue No. 06-2, “Accounting for Sabbatical Leave and Other
Similar Benefits Pursuant to FASB Statement No. 43” (EITF 06-2). EITF 06-2 requires companies to accrue the cost of such
compensated absences over the requisite service period. The company currently accrues the cost of compensated absences for
sabbatical programs when the eligible employee completes the requisite service period, which is seven years of service. The
company is required to apply the provisions of EITF 06-2 at the beginning of fiscal year 2007. EITF 06-2 allows for adoption
through retrospective application to all prior periods or through a cumulative-effect adjustment to retained earnings. The
company intends to adopt EITF 06-2 through a cumulative-effect adjustment and estimates that the adoption will result in an
additional liability of approximately $275 million and a reduction to retained earnings of approximately $175 million in the
first quarter of 2007.
Note 3: Employee Equity Incentive Plans
In May 2006, stockholders approved the 2006 Equity Incentive Plan (the 2006 Plan). Under the 2006 Plan, 175 million shares
of common stock were made available for issuance as equity awards to employees and non-employee directors through June
2008, of which a maximum of 80 million shares can be awarded as non-vested shares (restricted stock) or non-vested share
units (restricted stock units). The 2006 Plan allows for time-based, performance-based, and market-based vesting for equity
incentive awards. The 2004 Equity Incentive Plan (the 2004 Plan) was terminated upon stockholder approval of the 2006 Plan.
Shares previously authorized for issuance under the 2004 Plan are no longer available for future grants, although options
previously granted under the 2004 Plan remain outstanding. As of December 30, 2006, 162 million shares remain available for
future grant under the 2006 Plan. Intel may assume the equity incentive plans and the outstanding equity awards of certain
acquired companies. Once assumed, Intel does not grant additional stock under these plans.
The company began issuing restricted stock units in the second quarter of 2006. Shares are issued on the date the restricted
stock units vest. The majority of shares issued are net of the statutory withholding requirements that are paid by Intel on behalf
of its employees. As a result, the actual number of shares issued will be less than the number of restricted stock units granted.
Prior to vesting, restricted stock units do not have dividend equivalent rights, do not have voting rights, and the shares
underlying the restricted stock units are not considered issued and outstanding.
Awards granted to employees in 2006 under the company’s equity incentive plans generally vest over 4 years and expire 7
years from the date of grant. Awards granted to key officers, senior
-level employees, and key employees may have delayed
vesting beginning 3 to 6 years from the date of grant and expire 7 to 10 years from the date of grant.
In May 2006, stockholders approved the 2006 Stock Purchase Plan under which eligible employees may purchase shares of
Intel’s common stock at 85% of the market price at specific, predetermined dates. Under the 2006 Stock Purchase Plan, 240
million shares of common stock were made available for issuance through August 2011. The 1976 Stock Participation Plan
and all remaining shares available for issuance thereunder were cancelled as of the plan’s expiration in August 2006.
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