Westjet 2006 Annual Report Download - page 53

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512006 | WestJet Annual Report
2006 2005
Weighted average fair market value per option $ 4.29 $ 5.26
Average risk-free interest rate 4.2% 3.4%
Average volatility 42% 43%
Expected life (years) 3.6 3.7
Dividend per share $ 0.00 $ 0.00
The Corporation has not incorporated an estimated forfeiture rate for stock options that will not vest. Rather,
the Corporation accounts for actual forfeitures as they occur.
Employee stock option compensation expense is included in fl ight operations and general and administration
expenses and totalled $21,205,000 (2005 – $17,604,000, net of repurchase of $320,000 as noted in 7(c)).
(g) Contributed surplus:
Changes to contributed surplus were as follows:
2006 2005
Balance, beginning of year $ 39,093 $ 21,977
Stock-based compensation expense 21,205 17,604
Stock options exercised (1,642) (488)
Balance, end of year $ 58,656 $ 39,093
7. Share capital (continued):
(e) Employee Share Purchase Plan: (continued):
Current market price for voting shares issued from treasury is determined based on weighted average trading
price of the voting shares on the Toronto Stock Exchange for the fi ve trading days preceding the issuance.
Shares acquired for the ESPP are held in trust for one year. Employees may offer to sell voting shares, which
have not been held for at least one year, on January 1 and July 1 of each year, to the Corporation for 50% of
the then current market price.
The Corporation’s share of the contributions is recorded as compensation expense and amounted to
$28,209,000 (2005 – $21,690,000).
(f) Stock-based compensation:
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing
model. The following weighted average assumptions were used to determine the fair market value of options
granted during the years ended December 31: