Now that the October 2020 Update is officially available, Microsoft continues to test bug fixes with Insiders. Revenue deferred on Windows 10 licenses to reflect ratable recognition over the life of the device. Revenue from cloud-based services arrangements that are provided on a consumption basis (for example, the amount of storage used in a particular period) is recognized commensurate with the customer utilization of such resources. Our effective tax rate for fiscal years 2015 and 2014 was 34% and 21%, respectively. Judgment is required in assessing the future tax consequences of events that have been recognized on our consolidated financial statements or tax returns. Other-than-temporary impairments were $322 million in fiscal year 2016, compared with $183 million in fiscal year 2015. The trial of the British Columbia action commenced in May 2016. We believe the success of our gaming business is determined by the overall active user base through Xbox Live enabled content, availability of games, providing exclusive game content that gamers seek, the computational power and reliability of the devices used to access our content and services, and the ability to create new experiences via online services, downloadable content, and peripherals. In its operation of the business, management, including our chief operating decision maker, reviews certain financial information, including segmented internal profit and loss statements prepared on a basis not consistent with U.S. GAAP. Co-Chair and Trustee, Office Consumer revenue decreased $624 million or 17%, driven by declines in the Japan PC market, where Office is predominantly pre-installed on new PCs, offset in part by subscriber growth of Office 365 consumer. Expenses included a favorable foreign currency impact of approximately 4%. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use, or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. This report includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. 0000299869 00000 n Level 3 investments are valued using internally developed models with unobservable inputs. The components of intangible assets, all of which are finite-lived, were as follows: In the third quarter of fiscal year 2016, we corrected our intangible assets in the table above for a $585 million misstatement between gross carrying amount and accumulated amortization as of June 30, 2015. Productivity and Business Processes revenue decreased $546 million or 2%, mainly due to a decline in revenue from Office, offset in part by growth in revenue from Dynamics. The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations and financial condition of Microsoft Corporation. 0000305086 00000 n Dear shareholders, customers, partners, and employees: I’m proud of the progress we’ve made as a company this past year and excited about the opportunity for even more progress in the year ahead. The components of other income (expense), net were as follows: We use derivative instruments to: manage risks related to foreign currencies, equity prices, interest rates, and credit; enhance investment returns; and facilitate portfolio diversification. For more about Microsoft’s CSR commitments and performance, please visit: http://www.microsoft.com/csr. Unrealized losses from domestic and international equities are due to market price movements. Operating expenses that are allocated primarily include those relating to marketing of products and services from which multiple segments benefit, and are generally allocated based on relative gross margin. Slicers and Timelines provide a way to filter through the data with ease. There are two broad categories of OEMs. 0000006502 00000 n The VSOE of fair value for upcoming new products are based on the price determined by management having the relevant authority when the element is not yet sold separately, but is expected to be sold in the near future at the price set by management. We work on the go. In July 2014, we announced the retirement over a two-year period of Select Plus agreements for commercial customers, in favor of modern licensing options. We invent new scenarios that in turn create opportunity for our partners and help businesses accelerate their transformation while respecting each person’s privacy choices. As of June 30, 2016, the primary unresolved issue relates to transfer pricing, which could have a significant impact on our consolidated financial statements if not resolved favorably. We regularly reevaluate our estimates to assess the adequacy of the recorded warranty liabilities and adjust the amounts as necessary. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. Cash received is recorded as an asset with a corresponding liability. It's especially useful when you are working with vast amounts of data. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development. 0000302667 00000 n We monitor our foreign currency exposures daily and use hedges where practicable to offset the risks and maximize the economic effectiveness of our foreign currency positions. We recognized in other income (expense), net the following gains (losses) on contracts designated as fair value hedges and their related hedged items: We recognized the following gains (losses) on foreign exchange contracts designated as cash flow hedges: We estimate that $319 million of net derivative gains included in AOCI as of June 30, 2016 will be reclassified into earnings within the following 12 months. In fiscal year 2015, our U.S. income before income taxes was $7.4 billion and our foreign income before income taxes was $11.1 billion. 0000301628 00000 n The amount of cash, cash equivalents, and short-term investments held by foreign subsidiaries subject to other restrictions on the free flow of funds (primarily currency and other local regulatory) was $2.4 billion. We’re not simply building individual tools, but rather designing an intelligent fabric based on four principles – collaboration, mobility, intelligence, and trust. Gross margin increased $787 million or 1%, driven by our Intelligent Cloud, offset in part by a reduction in gross margin from Productivity and Business Processes. CALs provide access rights to certain Office Commercial products and services, including Exchange, SharePoint, and Skype for Business, and revenue is reported along with the associated Office products and services. 0000305749 00000 n Although management currently believes that resolving claims against us, individually or in aggregate, will not have a material adverse impact on our consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. As people move from device to device, so will their content and the richness of their services. As one of the largest providers of cloud computing at scale, we are well-positioned to help businesses move to the cloud and focus on innovation while leaving non-differentiating activities to reliable and cost-effective providers like Microsoft. Revenue can be defined as the amount of money a company receives from its customers in exchange for the sales of goods or services. Chief Executive Officer, Jean-Philippe Courtois Actual results and outcomes may differ from management’s estimates and assumptions. Our devices face competition from various computer, tablet, hardware, and phone manufacturers, and offer a unique combination of high-quality industrial design and innovative technologies across various price points, many of which are also current or potential partners and customers. Its realization will bring new power to cure disease and address global challenges like climate change. Other-than-temporary impairments were $183 million in fiscal year 2015, compared with $106 million in fiscal year 2014. Impairment, integration, and restructuring expense relating to our phone business decreased our fiscal year 2015 U.S income before income taxes by $1.1 billion and foreign income before income taxes by $8.9 billion. Accelerate Excel How to create Microsoft Excel 2016 reports While Excel is an optimal program to collect and organize your data, its information management features don't stop there. Other news and announcements that we may post from time to time that investors might find useful or interesting. Microsoft competes for talented individuals globally by offering an exceptional working environment, broad customer reach, scale in resources, the ability to grow one’s career across many different products and businesses, and competitive compensation and benefits. Examples of assumptions include: the elements comprising a software arrangement, including the distinction between upgrades or enhancements and new products; when technological feasibility is achieved for our products; the potential outcome of future tax consequences of events that have been recognized on our consolidated financial statements or tax returns; and determining when investment impairments are other-than-temporary.

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