Visa 2014 Annual Report Download - page 126
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Share-based compensation cost is recorded net of estimated forfeitures on a straight-line basis for
awards with service conditions only, and on a graded-vesting basis for awards with service,
performance and market conditions. The Company’s estimated forfeiture rate is based on an
evaluation of historical, actual and trended forfeiture data. For fiscal 2014, 2013, and 2012, the
Company recorded share-based compensation cost of $172 million, $179 million and $147 million,
respectively, in personnel on its consolidated statements of operations. The amount of capitalized
share-based compensation cost was immaterial during fiscal 2014, 2013 and 2012.
Options
Options issued under the EIP expire 10 years from the date of grant and vest ratably over 3 years
from the date of grant, subject to earlier vesting in full under certain conditions.
During fiscal 2014, 2013 and 2012, the fair value of each stock option was estimated on the date
of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
2014 2013 2012
Expected term (in years)(1) ................................... 4.80 6.08 6.02
Risk-free rate of return(2) .................................... 1.3% 0.8% 1.2%
Expected volatility(3) ........................................ 25.2% 29.3% 34.9%
Expected dividend yield(4) ................................... 0.8% 0.9% 0.9%
Fair value per option granted ................................. $ 44.11 $ 39.03 $ 29.65
(1) Beginning in fiscal 2014, assumption is based on the Company’s historical option exercises and
those of a set of peer companies that management believes is generally comparable to Visa. The
Company’s data is weighted based on the number of years between the measurement date and
Visa’s initial public offering as a percentage of the options’ contractual term. The relative weighting
placed on Visa’s data and peer data in fiscal 2014 was approximately 58% and 42%, respectively. In
fiscal 2013 and 2012, assumption was fully based on peer companies’ data.
(2) Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.
(3) Based on the Company’s implied and historical volatility. In fiscal 2013 and 2012, historical volatility
was a blend of Visa’s historical volatility and those of comparable peer companies. The relative
weighting between Visa historical volatility and the historical volatility of the peer companies was
based on the percentage of years Visa stock price information is available since its initial public
offering compared to the expected term. The expected volatilities ranged from 22% to 26% in fiscal
2014.
(4) Based on the Company’s annual dividend rate on the date of grant.
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