Overstock.com 2007 Annual Report Download - page 59

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compounded annually or more, the percentage will be 200%. If the percentage growth is between these percentages, the payment percentage will be
determined on the basis of straight line interpolation. Amounts payable under the plan were originally payable in cash. During interim and annual periods
prior to the third quarter of 2007, we recorded compensation expense based upon the period-end stock price and estimates regarding the ultimate growth in
economic value that is expected to occur. These estimates included assumed future growth rates in revenues, gross margins and other factors. If we were to
use different assumptions, the estimated compensation charges could be significantly different.
An amendment to the Performance Share Plan to allow us to make payments in the form of common stock was approved by the shareholders on May 15,
2007. In the third quarter of 2007, we determined the fair value of the awards on the amendment date and determined on August 7, 2007 to make the
payments in the form of common stock, rather than cash. Therefore, we reclassified awards under the performance share plan from their current status as
liability awards to equity awards in accordance with SFAS 123(R).
As of December 31, 2006, we had accrued $900,000 in total compensation expense under the plan. During the first six months of 2007, we accrued an
additional $650,000 related to performance shares granted prior to the determination to make the payments in the form of common stock. We reclassified the
total liability of approximately $1.6 million related to performance share awards granted prior to the determination to additional-paid-in-capital in the third
quarter of 2007. Over the remaining six months of 2007, we reduced the estimated compensation expense under the plan by $550,000, based on changes in
our estimate of growth in economic value over the remaining twelve months of the plan. As of December 31, 2007, we have recorded $1.0 million of expense
related to the Performance Share Plan.
Restricted Stock Units. In the first quarter of 2008, the Compensation Committee of the Board of Directors approved grants of approximately 460,000
restricted stock units to our officers and employees which vest over three years at 25% at the end of the first year, an additional 25% at the end of the second
year and 50% at the end of the third year.
Recent Accounting Pronouncements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. The FASB recently decided to postpone the effective date of SFAS 157 for other
non-financial assets and liabilities for one year. SFAS 157 is effective for us as of January 1, 2008 for financial items and January 1, 2009 for other non-
financial items. We anticipate that the adoption of SFAS 157 will not have a material impact on our consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of
FASB Statement No. 115 ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value.
Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date.
SFAS 159 is effective for our fiscal year beginning January 1, 2008. We anticipate that the adoption of SFAS 159 will not have a material impact on our
consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations ("SFAS 141(R)"), and SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements ("SFAS 160"). SFAS 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and
any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets
acquired. SFAS 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The
calculation of earnings per share will continue to be based on income amounts
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