Visa 2013 Annual Report Download - page 113

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VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2013
(4) Participating securities are unvested share-based payment awards that contain non-forfeitable
rights to dividends or dividend equivalents, such as the Company’s restricted stock awards,
restricted stock units and earned performance-based shares.
Note 16—Share-based Compensation
The Company’s 2007 Equity Incentive Compensation Plan, or the EIP, authorizes the compensation
committee of the board of directors to grant non-qualified stock options (“options”), restricted stock awards
(“RSAs”), restricted stock units (“RSUs”) and performance-based shares to its employees and non-
employee directors, for up to 59 million shares of class A common stock. Shares available for award may
be either authorized and unissued or previously issued shares subsequently acquired by the Company. The
EIP will continue to be in effect until all of the common stock available under the EIP is delivered and all
restrictions on those shares have lapsed, unless the EIP is terminated earlier by the Company’s board of
directors. No awards may be granted under the plan on or after 10 years from its effective date.
Share-based compensation cost is recorded net of estimated forfeitures on a straight-line basis for
awards with service conditions only, and on a graded-vesting basis for awards with service,
performance and market conditions. The Company’s estimated forfeiture rate is based on an
evaluation of historical, actual and trended forfeiture data. For fiscal 2013, 2012, and 2011, the
Company recorded share-based compensation cost of $179 million, $147 million and $154 million,
respectively, in personnel on its consolidated statements of operations. The amount of capitalized
share-based compensation cost was immaterial during fiscal 2013, 2012 and 2011.
Options
Options issued under the EIP expire 10 years from the date of grant and vest ratably over three
years from the date of grant, subject to earlier vesting in full under certain conditions.
During fiscal 2013, 2012 and 2011, the fair value of each stock option was estimated on the date
of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
2013 2012 2011
Expected term (in years)(1) ............................ 6.08 6.02 5.16
Risk-free rate of return(2) .............................. 0.8% 1.2% 1.2%
Expected volatility(3) ................................. 29.3% 34.9% 33.4%
Expected dividend yield(4) ............................. 0.9% 0.9% 0.8%
Fair value per option granted .......................... $ 39.03 $ 29.65 $ 27.50
(1) Based on a set of peer companies that management believes is generally comparable to Visa.
(2) Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.
(3) Based on the average of the Company’s implied and historical volatility. As the Company’s
publicly-traded stock history is relatively short, historical volatility relies in part on the historical
volatility of a group of peer companies that management believes is generally comparable to Visa.
The relative weighting between Visa historical volatility and the historical volatility of the peer
companies is based on the percentage of years Visa stock price information has been available
since its initial public offering compared to the expected term. The expected volatilities ranged
from 27% to 29% in fiscal 2013.
(4) Based on the Company’s annual dividend rate on the date of grant.
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