The Gap 2009 Annual Report Download - page 75

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At the end of each reporting period, we evaluate the probability that Stock Units will be granted. We record share-
based compensation expense based on the probability that the performance metrics will be achieved, with an
offsetting increase to current liabilities. We revalue the liability at the end of each reporting period and record an
adjustment to share-based compensation expense as required, based on the probability that the performance
metrics will be achieved. Upon achievement of the performance metrics, a Stock Unit is granted. At that time, the
associated liability is reclassified to stockholders’ equity.
Out of 4,992,213, 4,048,873, and 6,048,873 Stock Units granted in fiscal 2009, 2008, and 2007, respectively, 703,146,
600,544, and 119,102 Stock Units, respectively, were granted based on satisfaction of performance metrics.
At January 30, 2010 and January 31, 2009, the liability related to potential Stock Units based on performance
metrics was $6 million and $2 million, respectively, which is recorded in accrued expenses and other current
liabilities in the Consolidated Balance Sheets.
Stock Options
The fair value of options issued during fiscal 2009, 2008, and 2007 was estimated on the date of grant using the
following assumptions:
Fiscal Year
2009 2008 2007
Expected term (in years) ............................................................. 5.0 4.7 6.0
Expected volatility .................................................................. 51.3% 38.3% 28.9%
Dividendyield...................................................................... 1.9% 1.7% 1.6%
Risk-free interest rate ............................................................... 1.9% 2.5% 4.9%
A summary of stock option activity under the 2006 Plan and 2002 Plan for fiscal 2009 is as follows:
Shares
Weighted-
Average
Exercise Price
Balance at January 31, 2009 ....................................................... 34,721,342 $21.18
Granted ......................................................................... 3,245,649 $12.47
Exercised........................................................................ (3,009,844) $15.48
Forfeited/Canceled/Expired ....................................................... (4,480,485) $28.15
Balance at January 30, 2010 ....................................................... 30,476,662
A summary of additional information about stock options is as follows:
Fiscal Year
2009 2008 2007
Weighted-average fair value per share of stock options granted ......................... $4.86 $5.99 $4.99
Aggregate intrinsic value of stock options exercised (in millions) ........................ $14 $19 $32
Fair value of stock options vested (in millions) ......................................... $14 $17 $30
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