Symantec 2006 Annual Report Download - page 86

the expected life, the pro forma expense will be reduced by an aggregate of approximately $32 million over the
four-year average vesting period beginning with options granted in the quarter ended December 31, 2005.
For the pro forma amounts determined under SFAS No. 123, as set forth above, the fair value of each
stock option granted under the stock option plans or assumed in a business combination is estimated on the
date of grant or assumption using the Black-Scholes option-pricing model with the following weighted-average
assumptions:
Employee Employee Stock
Stock Options Purchase Plans
2006 2005 2004 2006 2005 2004
Expected life (years)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 5 5 0.5 1.25 1.25
Expected volatility ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.45 0.64 0.69 0.33 0.36 0.46
Risk free interest rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.55% 3.71% 3.00% 4.26% 2.33% 1.00%
The weighted average estimated fair value of employee stock options granted in fiscal 2006, 2005, and
2004 was $7.81, $15.46, and $8.73 per share, respectively. The weighted average estimated fair value of
employee stock purchase rights granted under the ESPP in fiscal 2006, 2005, and 2004 was $3.16, $8.19, and
$4.36, respectively.
For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expense using
the straight-line method over the options' vesting period for employee stock options and over the six-month
purchase period for stock purchases under the ESPP.
On March 30, 2006, we accelerated the vesting of certain stock options with exercise prices equal to or
greater than $27.00 per share that were outstanding on that date. We did not accelerate the vesting of any
stock options held by our executive officers or directors. The vesting of options to purchase approximately
6.7 million shares of common stock, or approximately 14% of our outstanding unvested options, was
accelerated. The weighted average exercise price of the stock options for which vesting was accelerated was
$28.73. We accelerated the vesting of the options to reduce future stock-based compensation expense that we
would otherwise be required to recognize in our results of operations after adoption of SFAS No. 123R. We
adopted SFAS No. 123R on April 1, 2006, which is the beginning of our 2007 fiscal year. Because of system
constraints, it is not practicable for us to estimate the amount by which the acceleration of vesting will reduce
our future stock-based compensation expense. The acceleration of the vesting of these options did not result in
a charge to expense in fiscal 2006.
Concentrations of Credit Risk
A significant portion of our revenues and net income is derived from international sales and independent
agents and distributors. Fluctuations of the U.S. dollar against foreign currencies, changes in local regulatory
or economic conditions, piracy, or nonperformance by independent agents or distributors could adversely
affect operating results.
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash
and cash equivalents, short-term investments, trade accounts receivable, and forward foreign exchange
contracts. Our investment portfolio is diversified and consists of investment grade securities. Our investment
policy limits the amount of credit risk exposure to any one issuer and in any one country. We are exposed to
credit risks in the event of default by the issuers to the extent of the amount recorded in the Consolidated
Balance Sheets. The credit risk in our trade accounts receivable is substantially mitigated by our credit
evaluation process, reasonably short collection terms, and the geographical dispersion of sales transactions. We
maintain reserves for potential credit losses and such losses have been within management's expectations.
Legal Expenses
We accrue estimated legal expenses when the likelihood of the incurrence of the related costs is probable
and management has the ability to estimate such costs. If both of these conditions are not met, management
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