Share Based Payments
ASC 718-10, Compensation — Stock Compensation, requires measurement of share based payment arrangements
at fair value and recognition of compensation cost over the service period, net of estimated forfeitures. The fair
value of restricted stock units is determined based on the number of units granted and the grant date fair value of
GAIN Capital Holding, Inc.’s common stock.
We measure the fair value of stock options on the date of grant using the Black-Scholes option pricing model
which requires the use of several estimates, including:
•
The volatility of our stock price;
•
The expected life of the option;
•
Risk free interest rates; and
•
Expected dividend yield.
The use of different assumptions in the Black-Scholes pricing model would result in different amounts of stockbased compensation expense. Furthermore, if different assumptions are used in future periods, stock-based
compensation expense could be materially impacted in the future.
The expected volatility was calculated based upon the volatility of public financial services companies, or
companies in similar industries. The average risk free rate is based upon the five year bond rate converted to a
continuously compounded interest rate.
Treasury Shares
In accordance with ASC 505-30, Equity – Treasury Stock, we treat the cost of acquired shares purchased as a
deduction from shareholders’ equity and as a reduction of the total shares outstanding when calculating adjusted
earnings per share.
Recent Accounting Pronouncements
In November 2011, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update,
or ASU, 2011-11 Balance Sheet: Disclosures about Offsetting Assets and Liabilities. The new disclosure
requirements mandate that entities disclose both gross and net information about instruments and transactions
eligible for offset in the statement of financial position as well as instruments and transactions subject to an
agreement similar to a master netting arrangement. In addition, the standard requires disclosure of collateral
received and posted in connection with master netting agreements or similar arrangements. This ASU is effective
for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. We do not expect
the adoption of ASU 2011-11 to have a material impact on our consolidated financial statements.
In September 2011, the FASB issued ASU 2011-08, Intangibles-Goodwill and Other: Testing Goodwill for
Impairment. This new standard amends the procedures for testing goodwill for impairment, simplifying how to
test goodwill for impairment by permitting an entity to first assess qualitative factors to determine whether it is
more likely than not that the fair value of a reporting unit is less than its carrying amount to determine whether it
is necessary to perform the two-step goodwill impairment test previously required. This new standard is effective
for fiscal years and quarters beginning after December 15, 2011; however, early adoption is permitted. The
adoption of ASU 2011-08 did not have a material impact on our consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income: Presentation of Comprehensive Income.
This new standard impacts the presentation requirements relating to Comprehensive Income. This new standard
is effective for fiscal years and quarters beginning after December 15, 2011; however, early adoption is
permitted. The adoption of ASU 2011-05 did not have a material impact on our consolidated financial
statements.
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