MasterCard 2013 Annual Report Download - page 92

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
88
Performance Stock Units
The following table summarizes the Company's PSU activity for the year ended December 31, 2013:
Units
Weighted-Average
Issue-Date Fair
Value1,
Weighted-Average
Remaining
Contractual Term Aggregate
Intrinsic Value
(in thousands) (in years) (in millions)
Outstanding at January 1, 2013 . . . . . . . . . . 1,135 $ 27
Issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 $ 56
Performance. . . . . . . . . . . . . . . . . . . . . . . . . 49 $ 32
Converted . . . . . . . . . . . . . . . . . . . . . . . . . . (577) $ 52
Forfeited/expired . . . . . . . . . . . . . . . . . . . . . — $ —
Outstanding at December 31, 2013 . . . . . . . 787 $ 37 0.9 $ 66
PSUs vested and expected to vest at
December 31, 2013 . . . . . . . . . . . . . . . . . . . 771 $ 37 0.9 $ 64
1 For PSUs issued in 2012 and 2011, the grant date is not established until the performance terms are fixed and the ultimate number of
shares to be issued is determined. PSUs issued and converted during 2013 show a weighted-average grant-date fair value in the above
figure.
In 2013, PSUs containing performance and market conditions were issued. Performance measures used to determine
the actual number of shares that vest after three years include net revenue growth, EPS growth, and relative total
shareholder return (“TSR”). Relative TSR is considered a market condition, while net revenue and EPS growth are
considered performance conditions. The Monte Carlo simulation valuation model is used to determine the grant-date
fair value.
The PSUs issued in 2012 and 2011 contain performance conditions based on the Company's performance against an
annually predetermined return on equity goal, with an average return on equity per year over the three-year period
commencing on January 1 of the grant year. The initial fair value of each PSU is the closing price on the New York
Stock Exchange of the Company's Class A common stock on the date of issuance. Given that the performance conditions
are subjective and not fixed on the date of issuance, these PSUs will be remeasured at the end of each reporting period,
at fair value, until the time the performance conditions are fixed and the ultimate number of shares to be issued is
determined. The grant-date fair value for each PSU issued in 2011 is $82.
Compensation expenses for PSUs are recognized over the requisite service period if it is probable that the performance
target will be achieved and subsequently adjusted if the probability assessment changes. As of December 31, 2013,
there was $11 million of total unrecognized compensation cost related to non-vested PSUs. The cost is expected to be
recognized over a weighted-average period of 1.5 years.