Activision 2008 Annual Report Download - page 95

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81
triggered cash payments to the beneficiaries for the portion of awards that were vested at the
closing date of the Business Combination. Upon closing of the Business Combination, we paid
$107 million under the BEP to employees. The determination of the value of Blizzard shares upon
a change in control is equal to the transaction value under the provisions of the BEP. The
outstanding non-vested rights became immediately vested upon the closing of the Business
Combination, cancelled and extinguished and converted into a new right to receive an amount in
cash eighteen months after the closing upon the terms and subject to the conditions set forth in the
BEP and in the Business Combination Agreement, including continued employment through the
payment date. At December 31, 2008, other non-current liabilities in the Consolidated Balance
Sheet include $70 million related to this plan. At December 31, 2007, Vivendi Games has
recorded liabilities related to the BEP of $144 million as a component of accrued expenses and
other liabilities in the Consolidated Balance Sheet.
Stock-based Compensation Expense
The following table sets forth the total stock-based compensation expense (amounts in
millions) resulting from stock options, restricted stock rights, the BEP, and the Vivendi Corporate
Plan included in our Consolidated Statements of Operations in accordance with SFAS No. 123R
for the year ended December 31, 2008, 2007, and 2006:
For the years ended
December 31,
2008 2007 2006
Cost of sales—software royalties and amortization.........
.
$4 $3 $1
Product development .......................................................
.
44 93 20
Sales and marketing.........................................................
.
10 8 2
General and administrative ..............................................
.
31 34 25
Stock-based compensation expense before income
taxes.............................................................................
.
89 138 48
Income tax benefit ...........................................................
.
(35) (54) (19)
Total stock-based compensation expense, net of
income tax benefit........................................................
.
$54 $84 $29
Additionally, stock option expenses are capitalized in accordance with SFAS No. 86,
“Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed” as
discussed in Note 1 of the Notes to Consolidated Financial Statements. The following table
summarizes stock-based compensation included in our Consolidated Balance Sheets as a
component of software development (amounts in millions):
Software
development
Balance at January 1, 2008 ..........................................................
.
$—
Stock-based compensation expense capitalized during period ....
.
32
Amortization of capitalized stock-based compensation expense.
.
(10)
Balance at December 31, 2008 ....................................................
.
$22