Pentax 2007 Annual Report Download - page 65

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63
2. Valuation Method for Fair Value of Stock Options
The 6th stock subscription rights granted for the year ended March 31, 2007 are valued as follows:
Fair value of stock subscription rights is valued for each of the following exercise periods.
(a) From October 1, 2007 to September 30, 2008
(b) From October 1, 2007 to September 30, 2009
(c) From October 1, 2007 to September 30, 2010
(d) From October 1, 2007 to September 30, 2016
a. Option-pricing model used: Black–Scholes model
b. Major assumptions used:
(a) (b) (c) (d)
Stock price volatility (Note 1) 32.28% 33.91% 34.32% 37.19%
Estimated time to exercise (Note 2) 5.40 years 5.90 years 6.40 years 6.90 years
Estimated dividends (Note 3) ¥60 ¥60 ¥60 ¥60
Risk free rate (Note 4) 1.32% 1.38% 1.43% 1.49%
Notes: 1. It is based on historical volatility of stock price for the period, corresponding to the estimated time to exercise, prior to the grant date.
2. It is assumed to be exercised in the middle of the exercise period due to the lack of enough data for other reasonable estimation.
3. It is based on the actual dividends for the year ended March 31, 2006.
4. It is based on interest rates on national government bonds with maturity corresponding to the estimated time to exercise.
3. Estimation Methods for Number of Vested Stock Options
Only the actual number of stock options forfeited is reflected due to difficulty in estimating the number of stock options to be forfeited in
the future.
4.
Stock-based compensation expense is recorded on the consolidated statement of income for the year ended March 31, 2007 as follows:
Cost of sales ¥ 44 million
Selling, general and administrative expenses ¥123 million
1. The Outline and Purposes of Transaction
Following the decision made by the chief executive officer of the
Company on July 28, 2006, the Company split-up its contact lens
production function and merged it into HOYA HEALTHCARE
CORPORATION, a wholly-owned subsidiary, on October 1, 2006.
The purpose of this transaction is to achieve more efficient man-
agement for the Group; HOYA HEALTHCARE CORPORATION,
which currently engages in retail of contact lens, is expected to
be able to reflect market needs more rapidly and effectively into
development and production by combining the related production
function.
2. Shares to Be Issued
No shares were to be issued in connection with this transaction,
as permitted under the Corporate Law of Japan, since HOYA
HEALTHCARE CORPORATION is a wholly-owned subsidiary of
the Company.
3. Treatment of the Company’s Stock Subscription Rights
Stock subscription rights of HOYA HEALTHCARE CORPORATION
will not be allocated to the holders of stock subscription rights of
the Company as substitutes.
4. Summary of Accounting Treatment
Since the transaction is classified as “transactions under
common control” under the “Accounting Standard for Business
Combinations,” the Company does not recognize gain/loss on
the transaction, and HOYA HEALTHCARE CORPORATION is to
record the assets and liabilities transferred at their book value
before the transaction.
No. 16 BUSINESS COMBINATIONS AND BUSINESS DIVESTITURES