Company: ISRG
Filing Date: 2025-01-31
Form Type: 10-K
Source: 0001035267-25-000017
Chunk: 155

Company: INTUITIVE SURGICAL INC
Filing Date: 2025-01-31
Form: 10-K
Item: Item 8
Chunk 155
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 fair value recognition and measurement provisions under GAAP. The Company’s share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period. The Company estimates expected forfeitures at the time of grant and revises the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimated.Restricted stock units.  The fair value of restricted stock units (“RSUs”) is determined based on the closing quoted price of the Company’s common stock on the date of the grant.Stock options.  The Black-Scholes-Merton option-pricing model is used to estimate the fair value of stock options granted and utilizes the following inputs: (1) closing quoted price of the Company’s common stock on the date of grant; (2) expected term; (3) expected volatility; and (4) risk-free interest rate.Expected Term: The expected term represents the weighted-average period that the stock options are expected to be outstanding prior to being exercised. The Company determines expected term based on historical exercise patterns and its expectation of the time that it will take for employees to exercise options still outstanding.Expected Volatility: The Company uses market-based implied volatility for purposes of valuing stock options granted. Market-based implied volatility is derived based on actively traded options with expirations greater than one year on the Company’s common stock. The extent to which the Company relies on market-based volatility when valuing options depends, among other things, on the availability of traded options on the Company’s stock and the term of such options. Due to a sufficient volume of traded options, the Company used 100% market-based implied volatility to value options granted, which the Company believes is more representative of future stock price trends than historical volatility.Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant for the expected term of the stock option.Performance stock units.  Performance stock units (“PSUs”) include predefined performance and market conditions. The fair value of performance stock units with performance conditions is based on the closing quoted price of the Company’s common stock on the date of the grant. The Company estimates the number of awards with performance conditions that will ultimately vest based on the probability of achievement each quarter to determine the amount of compensation expense to recognize each reporting period. The fair value of performance stock units that include a market condition is determined using a Monte Carlo valuation model.Employee stock purchase plan.