EMC 2006 Annual Report Download - page 39

Table of Contents
Accounting for Stock-based Compensation
On January 1, 2006, we adopted FAS No. 123R, which requires the recognition of compensation expense for all share-based payment awards made to
employees and directors based upon the awards' estimated grant date fair value. Previously, we elected to account for these share-based payment awards under
APB No. 25 and elected to only disclose the impact of expensing the fair value of stock options in the notes to the Consolidated Financial Statements. FAS
No. 123R requires management to make estimates and assumptions to determine the underlying value of stock options and restricted stock awards, including
the vesting or accelerated vesting for restricted stock awards containing performance-based vesting features, the expected life of stock options and an estimate
of future forfeitures. Changes to these estimates and assumptions may have a significant impact on the value of stock-based compensation expense
recognized, which could have a material impact on our financial statements. Total pre-tax stock-based compensation expense recognized in 2006 was $409.4.
New Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement
No. 109" ("FIN No. 48"). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance
with FAS No. 109, "Accounting for Income Taxes." FIN No. 48 prescribes a two-step process to determine the amount of tax benefit to be recognized. First,
the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed "more-likely-
than-not" to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the
benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. We are required
to adopt FIN No. 48 effective as of January 1, 2007. We are currently evaluating the effect FIN No. 48 will have on our financial statements. We do not
expect the impact will be material.
In September 2006, the FASB issued FAS No. 157, "Fair Value Measurements" ("FAS No. 157"), which addresses how companies should measure fair
value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. FAS No. 157
defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value
measurements. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and should be applied
prospectively, except in the case of a limited number of financial instruments that require retrospective application. We are currently evaluating the potential
impact of FAS No. 157 on our financial position and results of operations.
In February 2007, the FASB issued FAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of
FAS 115" ("FAS No. 159"). The new statement allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair
value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item's fair
value in subsequent reporting periods must be recognized in current earnings. FAS No. 159 is effective for fiscal years beginning after November 15, 2007.
We are currently evaluating the potential impact of FAS No. 159 on our financial position and results of operations.
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