McKesson 2008 Annual Report Download - page 107

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
100
The following table provides data related to all stock option activity:
Years Ended March 31,
(In millions, except per share data) 2008 2007 2006
Weighted-average grant date fair value per stock option $ 17.90 $ 15.43 $ 18.26
Aggregate intrinsic value on exercise $ 220 $ 204 $ 278
Cash received upon exercise $ 309 $ 354 $ 538
Tax benefits realized related to exercise $ 83 $ 74 $ 106
Total fair value of shares vested $ 8 $ 4 $ 89
Total compensation cost, net of estimated forfeitures,
related to unvested stock options not yet recognized,
pre-tax $ 25 $ 18 NA
Weighted-average period in years over which stock
option compensation cost is expected to be recognized 1 2 NA
NA – Not applicable as stock option compensation cost was not generally recognized under APB Opinion No. 25 in
2006.
IV. RS, RSUs and PeRSUs
RS and RSUs, which entitle the holder to receive, at the end of a vesting term, a specified number of shares of
the Company’ s common stock, are accounted for at fair value at the date of grant. The fair value of RS and RSUs
under our stock plans is determined by the product of the number of shares that are expected to vest and the grant
date market price of the Company’ s common stock. The Compensation Committee determines the vesting terms at
the time of grant. These awards generally vest in four years. The fair value of RS and RSUs with graded vesting
and service conditions is expensed on a straight-line basis over the requisite service period. RS contains certain
restrictions on transferability and may not be transferred until such restrictions lapse.
Non-employee directors receive an annual grant of up to 5,000 RSUs, which vest immediately, and which are
expensed upon grant. However, payment of any shares is delayed until the director is no longer performing services
for the Company. At March 31, 2008, 54,000 RSUs for our directors are vested, but shares have not been issued.
PeRSUs are RSUs for which the number of RSUs awarded may be conditional upon the attainment of one or
more performance objectives over a specified period. Vesting of such awards ranges from one to three-year periods
following the end of the performance period and may follow the graded or cliff method of vesting.
PeRSUs are accounted for as variable awards until the performance goals are reached and the grant date is
established. The fair value of PeRSUs is determined by the product of the number of shares eligible to be awarded
and expected to vest, and the market price of the Company’ s common stock, commencing at the inception of the
requisite service period. During the performance period, the PeRSUs are re-valued using the market price and the
performance modifier at the end of a reporting period. At the end of the performance period, if the goals are
attained, the award is classified as a RSU and is accounted for on that basis. The fair value of PeRSUs is expensed
on an accelerated basis, over the requisite service period of four years. For RS and RSUs with service conditions,
we have elected to amortize the expense on a straight-line basis.