Activision 2012 Annual Report Download - page 64

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46
awards granted by Activision, Inc. prior to, but not yet vested as of July 9, 2008, based on the revalued fair value estimated at July 9, 2008, and
compensation expense for the stock-based payment awards granted by us subsequent to July 9, 2008.
We estimate the value of stock-based payment awards on the measurement date using a binomial-lattice model. Our determination of
fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions
regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility
over the term of the awards, and actual and projected employee stock option exercise behaviors.
We generally determine the fair value of restricted stock rights (including restricted stock units, restricted stock awards and
performance shares) based on the closing market price of the Company’s common stock on the date of grant. Certain restricted stock rights
granted to our employees and senior management vest based on the achievement of pre-established performance or market goals. We estimate the
fair value of performance-based restricted stock rights at the closing market price of the Company’s common stock on the date of grant. Each
quarter we update our assessment of the probability that the specified performance criteria will be achieved. We amortize the fair values of
performance-based restricted stock rights over the requisite service period adjusted for estimated forfeitures for each separately vesting tranche of
the award. We estimate the fair value of market-based restricted stock rights at the date of grant using a Monte Carlo valuation methodology and
amortize those fair values over the requisite service period adjusted for estimated forfeitures for each separately vesting tranche of the award. The
Monte Carlo methodology that we use to estimate the fair value of market-based restricted stock rights at the date of grant incorporates into the
valuation the possibility that the market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the
market-based restricted stock rights at the date of grant must be recognized as compensation expense even if the market condition is not achieved.
However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria.
See Note 18 of the Notes to Consolidated Financial Statements.
3. Investment and other income (expense), net
Investment and other income (expense), net is comprised of the following (amounts in millions):
For the Years Ended
December 31,
2012
2011
2010
Interest income ........................................................................................................................
$6
$14
$8
Interest expense .......................................................................................................................
(1)
(4)
(5)
Change in fair value of other financial liability ......................................................................
—
—
22
Net realized gain (loss) on foreign exchange contracts with Vivendi ................................
2
(7)
(2)
Investment and other income (expense), net ...........................................................................
$7
$3
$23
4. Cash and Cash Equivalents
The following table summarizes the components of our cash and cash equivalents with original maturities of three months or less at
the date of purchase (amounts in millions):
At December 31,
2012
2011
Cash...............................................................................................................................................
$425
$270
Time deposits ................................................................................................................................
23
24
Money market funds .....................................................................................................................
3,511
2,869
U.S. treasuries and/or foreign government bonds ........................................................................
—
2
Cash and cash equivalents ............................................................................................................
$3,959
$3,165