Adaptec 2005 Annual Report Download - page 73

Table of Contents
Other Indemnifications. From time to time, on a limited basis, the Company indemnifies customers, as well as suppliers, contractors, lessors, and others with
whom it has contracts, against combinations of loss, expense, or liability arising from various triggering events related to the sale and use of Company products,
the use of their goods and services, the use of facilities, the state of assets that we sell and other matters covered by such contracts, normally up to a specified
maximum amount. The Company evaluates estimated losses for such indemnifications under SFAS No. 5, Accounting for Contingencies, as interpreted by FASB
Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The
Company has no history of indemnification claims for such obligations and has not accrued any liabilities related to such indemnifications in the consolidated
financial statements.
Stock-based compensation. On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based
Payment” (SFAS 123(R)), which requires the recognition of compensation expense for all share-based payment awards. SFAS 123(R) requires the Company to
measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost of such award will
be recognized over the period during which services are provided in exchange for the award, generally the vesting period. The Company adopted SFAS 123(R)
using the modified prospective transition method and therefore prior period results have not been restated.
In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107). The interpretations in SAB 107 express the views of the SEC staff regarding the
interaction between SFAS 123(R) and certain SEC rules and regulations and provide the staff’s views regarding the valuation of share-based payment
arrangements for public companies. The Company applied the principles of SAB 107 in connection with its adoption of SFAS 123(R).
During the year ended December 30, 2007, the Company recognized $35.3 million in stock-based compensation expense or $0.16 per share. No domestic tax
benefits were attributed to the tax timing differences arising from stock-based compensation expense because a full valuation allowance was maintained for all
domestic deferred tax assets.
Prior to the adoption of SFAS 123(R), the Company recognized stock-based compensation using the intrinsic value method prescribed by Accounting Principles
Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25), and applied the disclosure provisions of SFAS 123, “Accounting for Stock-Based
Compensation” (SFAS 123) as if the Company had applied the fair value method to measuring stock-based compensation expense.
If the Company had accounted for stock-based compensation in accordance with the fair value method as prescribed by SFAS 123, net loss and net loss
per share for 2005 would have been:
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Source: PMC SIERRA INC, 10-K, February 22, 2008