JP Morgan Chase 2015 Annual Report Download - page 242

Notes to consolidated financial statements
232 JPMorgan Chase & Co./2015 Annual Report
RSUs, employee stock options and SARs activity
Compensation expense for RSUs is measured based on the number of shares granted multiplied by the stock price at the grant
date, and for employee stock options and SARs, is measured at the grant date using the Black-Scholes valuation model.
Compensation expense for these awards is recognized in net income as described previously. The following table summarizes
JPMorgan Chase’s RSUs, employee stock options and SARs activity for 2015.
RSUs Options/SARs
Year ended December 31, 2015
Number of
shares
Weighted-
average grant
date fair value
Number of
awards
Weighted-
average
exercise
price
Weighted-average
remaining
contractual life
(in years)
Aggregate
intrinsic
value
(in thousands, except weighted-average data, and
where otherwise stated)
Outstanding, January 1 100,568 $ 47.81 59,195 $ 45.00
Granted 36,096 56.31 107 64.41
Exercised or vested (47,709) 41.64 (14,313) 40.44
Forfeited (3,648) 54.17 (943) 43.04
Canceled NA NA (580) 278.93
Outstanding, December 31 85,307 $ 54.60 43,466 $ 43.51 4.6 $ 1,109,411
Exercisable, December 31 NA NA 31,853 43.85 4.0 832,929
The total fair value of RSUs that vested during the years ended December 31, 2015, 2014 and 2013, was $2.8 billion, $3.2
billion and $2.9 billion, respectively. The weighted-average grant date per share fair value of stock options and SARs granted
during the year ended December 31, 2013, was $9.58. The total intrinsic value of options exercised during the years ended
December 31, 2015, 2014 and 2013, was $335 million, $539 million and $507 million, respectively.
Compensation expense
The Firm recognized the following noncash compensation
expense related to its various employee stock-based
incentive plans in its Consolidated statements of income.
Year ended December 31, (in millions) 2015 2014 2013
Cost of prior grants of RSUs and SARs
that are amortized over their
applicable vesting periods $ 1,109 $ 1,371 $ 1,440
Accrual of estimated costs of stock-
based awards to be granted in future
periods including those to full-career
eligible employees 878 819 779
Total noncash compensation expense
related to employee stock-based
incentive plans $ 1,987 $ 2,190 $ 2,219
At December 31, 2015, approximately $688 million
(pretax) of compensation expense related to unvested
awards had not yet been charged to net income. That cost is
expected to be amortized into compensation expense over a
weighted-average period of 0.9 years. The Firm does not
capitalize any compensation expense related to share-based
compensation awards to employees.
Cash flows and tax benefits
Income tax benefits related to stock-based incentive
arrangements recognized in the Firm’s Consolidated
statements of income for the years ended December 31,
2015, 2014 and 2013, were $746 million, $854 million
and $865 million, respectively.
The following table sets forth the cash received from the
exercise of stock options under all stock-based incentive
arrangements, and the actual income tax benefit realized
related to tax deductions from the exercise of the stock
options.
Year ended December 31, (in millions) 2015 2014 2013
Cash received for options exercised $20$ 63 $ 166
Tax benefit realized(a) 64 104 42
(a) The tax benefit realized from dividends or dividend equivalents paid on equity-
classified share-based payment awards that are charged to retained earnings are
recorded as an increase to additional paid-in capital and included in the pool of excess
tax benefits available to absorb tax deficiencies on share-based payment awards.
Valuation assumptions
The following table presents the assumptions used to value
employee stock options and SARs granted during the year
ended December 31, 2013, under the Black-Scholes
valuation model. There were no material grants of stock
options or SARs for the years ended December 31, 2015
and 2014.
Year ended December 31, 2013
Weighted-average annualized valuation assumptions
Risk-free interest rate 1.18%
Expected dividend yield 2.66
Expected common stock price volatility 28
Expected life (in years) 6.6
The expected dividend yield is determined using forward-
looking assumptions. The expected volatility assumption is
derived from the implied volatility of JPMorgan Chase’s
stock options. The expected life assumption is an estimate
of the length of time that an employee might hold an option
or SAR before it is exercised or canceled, and the
assumption is based on the Firm’s historical experience.