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East Bay Beta Alpha Psi

April 19, 2007. East Bay Beta Alpha Psi. Agenda. Introductions General Information Stock Options Opportunities Questions ** Prizes for the first 10 people who ask a question**. Deloitte & Touche. OUR MISSION: Help our Clients and People Excel

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East Bay Beta Alpha Psi

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  1. April 19, 2007 East BayBeta Alpha Psi

  2. Agenda • Introductions • General Information • Stock Options • Opportunities • Questions ** Prizes for the first 10 people who ask a question**

  3. Deloitte & Touche OUR MISSION: Help our Clients and People Excel OUR VISION: To be recognized as the best professional services firm in the world • Deloitte Touche Tohmatsu • Located in 670 Cities • 148 Countries • Over 115,000 total employees • 5,600 Partners • Deloitte & Touche USA LLP • Located in 107 Offices in 90 Cities • Over 30,000 employees • 7,390 CPA’s • 2,568 Partners

  4. NorPac Region NorPac Mark Edmunds Boise Fresno Honolulu Oakland Portland Sacramento San Francisco San Jose Salt Lake City Seattle • 3,200 professionals in Nor Pac • 300 partners & firm directors • 10 office locations

  5. Values & Focus CORE VALUES • Integrity • Commitment to Each Other • Strength from Cultural Diversity • Outstanding Value to Clients FOCUS • One Team, Four World-Class Businesses • Approachable and Engaged Managers & Partners • Focused on Individual Career Enhancement • Women’s Initiative and Diversity & Inclusion

  6. Service Lines • Audit & Enterprise Risk Services (AERS) • Tax • Consulting • Financial Advisory Services (FAS)

  7. Stock Options • What are Stock Options? • Important Stock Option Terms • Why do we need to do this (FAS123R) • How to Value Stock Options (BS Model) • Accounting for Stock Options

  8. Stock Options What is a Stock Option?

  9. Stock Options • The right to purchase a fixed number of shares at a stated price for a specified period • Granted to employees, directors, consultants, advisorsUsed to compensate for past, current or future services • Usually part of a company plan

  10. Stock Options Exercise Stock- employees are buying cheaper stock (Less than value traded on the market) Less money coming into Company when employee exercises when vested. Dilutes the value of the stock outstanding Company must purchase its own stock to prevent dilution (a COST to the Company)

  11. Stock Options Q. Where is this cost originating from? A. Coming from employees compensation in the past (Value Exchange Relationship) Thus, account for it as granted (SFAS123R)

  12. Stock Options Assume Company A, B have same operations but: Company A: pays all compensation in Stock Option. Company B: pays all compensation in cash Result: Company A would have higher net income despite operation is the same.

  13. Black-Scholes Model (Fair-Value) • Uses certain assumptions: 1. Stock Price 2. Exercise Price 3. Expected Term 4. Volatility Rate 5. Risk Free Interest Rate 6. Dividend Rate

  14. Example • Grants 300 shares to its 3,000 employees • Assume BS model Fair Value is $14.69 • 3 year vesting period • Employee turnover is 3% • Tax Rate of 35% Total options expected to vest 821,406 (900,000 *0.973) Total Compensation cost = $12,066,454 (821,406 * 14.69)

  15. Entries Recorded 12/31/07 Dr. Stock Compensation Expense (I/S) $4,022,151 Cr. Additional Paid in Capital (Equity) $4,022,151 To recognize the compensation cost. Dr. Deferred Tax Asset (Asset) $1,407,753 Cr. Deferred tax benefit (I/S) $1,407,753 To recognized the deferred tax asset for the temp difference

  16. ? Questions?

  17. Opportunities Summer Project Group Deloitte Leadership Conference Full-time Positions – Apply in October for Fall 2008 Requirements: • Education: BS, MS, MBA in Accounting or CPA Eligible • GPA: 3.0 or above • Strong analytical and problem-solving skills • Well rounded and involved in extra curricular activities • Leader and a team player • Ability to work effectively with people at all management levels

  18. Start your career here! The Deloitte U.S. Firms were ranked No. 3 in BusinessWeek’s Best Places to Launch a Career We’ll take you where you want to go. Our internship program was ranked one of the Top Five Internships in the country on Fortune.com and CNN Money.com We ranked No. 5 on the Top 10 list of Best Workplaces for New Undergrad Business Majors as ranked by employment trends monitor Universum Communications

  19. Questions?

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