Intel 2013 Annual Report Download - page 95

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90
Share-Based Compensation
Share-based compensation recognized in 2013 was $1.1 billion ($1.1 billion in 2012 and $1.1 billion in 2011).
On a quarterly basis, we assess changes to our estimate of expected equity award forfeitures based on our review
of recent forfeiture activity and expected future employee turnover. We recognize the effect of adjustments made to
the forfeiture rates, if any, in the period that we change the forfeiture estimate. The effect of forfeiture adjustments in
2013, 2012, and 2011 was not significant.
The total share-based compensation cost capitalized as part of inventory as of December 28, 2013, was $38 million
($41 million as of December 29, 2012 and $38 million as of December 31, 2011). During 2013, the tax benefit that
we realized for the tax deduction from share-based awards totaled $385 million ($510 million in 2012 and $327
million in 2011).
We estimate the fair value of restricted stock unit awards with time-based vesting using the value of our common
stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock
prior to vesting. We estimate the fair value of market-based restricted stock units using a Monte Carlo simulation
model on the date of grant. We based the weighted average estimated value of restricted stock unit grants, as well
as the weighted average assumptions that we used in calculating the fair value, on estimates at the date of grant,
for each period as follows:
2013 2012 2011
Estimated values $ 21.45 $ 25.32 $ 19.86
Risk-free interest rate 0.2% 0.3% 0.7%
Dividend yield 3.8% 3.3% 3.4%
Volatility 25% 26% 27%
We use the Black-Scholes option pricing model to estimate the fair value of options granted under our equity
incentive plans and rights to acquire stock granted under our stock purchase plan. We based the weighted average
estimated value of employee stock option grants and rights granted under the stock purchase plan, as well as the
weighted average assumptions used in calculating the fair value, on estimates at the date of grant, for each period
as follows:
Stock Options Stock Purchase Plan
2013 2012 2011 2013 2012 2011
Estimated values $ 3.11 $ 4.22 $ 3.91 $ 4.52 $ 5.47 $ 4.69
Expected life (in years) 5.2 5.3 5.4 0.5 0.5 0.5
Risk-free interest rate 0.8% 1.0% 2.2% 0.1% 0.1% 0.2%
Dividend yield 3.9% 3.3% 3.4% 4.0% 3.3% 3.6%
Volatility 25% 25% 27% 22% 24% 26%
We base the expected volatility on implied volatility because we have determined that implied volatility is more
reflective of market conditions and a better indicator of expected volatility than historical volatility. Prior to 2011, we
used the simplified method of calculating expected life due to significant differences in the vesting terms and
contractual life of current option grants compared to our historical grants. In 2011, we began using historical option
exercise data as the basis for determining expected life, as we believe that we have sufficient historical data to
provide a reasonable basis upon which to estimate the expected life input for valuing options using the Black-
Scholes model.
Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)