AMD 2007 Annual Report Download - page 72

Table of Contents
Stock-Based Compensation Expense
On December 26, 2005, we adopted FASB Statement No. 123 (revised 2004), Share-Based Payment (SFAS 123R), which requires the measurement and
recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee
stock purchases related to our Employee Stock Purchase Plan, based on estimated fair values. We adopted SFAS 123R using the modified prospective transition
method. Prior to the adoption of SFAS 123R, we recognized stock-based compensation expense in accordance with Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees. Upon adoption of SFAS 123R, we changed our method of attributing the value of stock-based compensation
expense from the multiple-option (i.e. accelerated) approach to the single option (i.e. straight-line) method. Also, upon adoption of SFAS 123R, we changed the
method of valuing stock option awards from the Black-Scholes-Merton (Black-Scholes) option pricing model, which was previously used for our pro forma
information disclosures of stock-based compensation expense as required under FASB Statement No. 123, Stock Based Compensation (SFAS 123) to a
lattice-binomial option-pricing model. The following table summarizes our stock-based compensation expense related to employee stock options, restricted
stock, restricted stock units and employee stock purchases pursuant to our Employee Stock Purchase Plan under SFAS 123R for the years ended December 29,
2007 and December 31, 2006, which we recorded in our consolidated results of operations as follows:
Year Ended
December 29,
2007
Year Ended
December 31,
2006
( In millions)
Stock-based compensation included as a component of:
Cost of sales $ 11 $ 8
Research and development 53 30
Marketing, general, and administrative 49 39
Total stock-based compensation expense related to employee stock options, restricted stock, restricted stock
units, and employee stock purchases 113 77
Tax benefit — —
Stock-based compensation expense related to employee stock options, restricted stock, restricted stock units,
and employee stock purchases, net of tax $ 113 $ 77
We recognized minimal stock-based compensation expense for the year ended December 25, 2005.
In anticipation of the adoption of SFAS 123R, beginning in the first quarter of 2006 we changed the quantity and type of instrument we primarily use in
stock-based payment programs for our employees by shifting to granting more restricted stock units. Restricted stock units are awards that obligate us to issue a
specific number of shares of our common stock if the vesting terms and conditions are satisfied. Restricted stock units based on continued service generally vest
over three to four years from the date of grant. Restricted stock units based solely on performance conditions generally do not vest for at least one year from the
date of grant. Beginning in the first quarter of 2006, all employees below the level of vice president receive restricted stock units and employees at the vice
president level and above receive grants of restricted stock units and stock options. As of December 29, 2007, we had $39 million of total unrecognized
compensation expense, net of estimated forfeitures, related to stock options that will be recognized over the weighted average period of 1.45 years. Also, as of
December 29, 2007, we had $114 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock and restricted stock
units that will be recognized over the weighted average period of 2.15 years. For additional information on stock-based compensation expense, see Note 12 to our
consolidated financial statements.
On April 27, 2005, we accelerated the vesting of all stock options outstanding under the 2004 Equity Incentive Plan and our prior equity compensation
plans that had exercise prices per share higher than the closing price of our stock on April 27, 2005, which was $14.51. Options to purchase approximately
12 million shares of
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008