Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. If we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in other income (expense), net and a new cost basis in the investment is established. More broadly, we are leading the way with solutions tailored to the needs of key industries. These contracts are not designated as hedging instruments and are included in Other contracts in the tables below. We know that as we become more representative of the communities where we live and work, and the people around the world who we aspire to serve, we become better at helping everyone on the planet achieve more. It extends to our investments in security, and our belief that the public and private sectorsincluding tech companiesmust be transparent so we can work together on a coordinated global response. Contribution in Q2 2022. Customized manager learning to build people manager capabilities and similar learning solutions to build leadership skills for all employees including differentiated leadership development programs. Many of our shareholders are increasingly focused on the importance of the effective engagement and action on ESG topics. If recognized, the resulting tax benefit would affect our effective tax rates for fiscal years 2021, 2020, and 2019 by $12.5 billion, $12.1 billion, and $12.0 billion, respectively. 4 min read. Windows Commercial products and cloud services revenue increased 14% driven by demand for Microsoft 365. Date: Tuesday, November 30, 2021 In June 2020, with tens of millions of people displaced from their jobs due to the pandemic, we brought resources together from across Microsoft, inclusive of LinkedIn and GitHub, to help 25 million people connect to the digital skills for in-demand roles. We perform a qualitative assessment on a periodic basis. We have determined that certain sales incentive programs meet the requirements to be capitalized. Gross margin increased $6.5 billion or 18% driven by growth in Office 365 Commercial and LinkedIn, and the change in estimated useful lives of our server and network equipment. On September 18, 2019, our Board of Directors approved a share repurchase program authorizing up to $40.0 billion in share repurchases. Revenue and expenses are translated at average rates of exchange prevailing during the year. This global approach helps us remain competitive in local markets and enables us to continue to attract top talent from across the world. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Our ecosystem of customers and partners has stepped up to help people and organizations in every country use technology to be resilient and transform during the most trying of circumstances. The proceeds of these issuances were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, repurchases of capital stock, acquisitions, and repayment of existing debt. As part of our effort to promote a One Microsoft and inclusive culture, we expanded stock eligibility to all Microsoft employees as part of our annual rewards process. The pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation. Equity investments with readily determinable fair values are measured at fair value. Net realizable value is the estimated selling price less estimated costs of completion, disposal, and transportation. We also deliver relevant online advertising to a global audience. We believe our clouds global scale, coupled with our broad portfolio of identity and security solutions, allows us to effectively solve complex cybersecurity challenges for our customers and differentiates us from the competition. Timing of revenue recognition may differ from the timing of invoicing to customers. The components of the provision for income taxes were as follows: U.S. and foreign components of income before income taxes were as follows: The items accounting for the difference between income taxes computed at the U.S. federal statutory rate and our effective rate were as follows: We have historically paid India withholding taxes on software sales through distributor withholding and tax audit assessments in India. We have paid transition tax of $4.7 billion, which included $1.5 billion for fiscal year 2021. 17,465. For multi-year agreements, we generally invoice customers annually at the beginning of each annual coverage period. Partners in this program can easily package their own products and services to directly provision, manage, and support their customer subscriptions. ", Microsoft, Microsoft's revenue from 2012 to 2022 financial years, by segment (in billion U.S. dollars) Statista, https://www.statista.com/statistics/273482/segment-revenue-of-microsoft/ (last visited March 01, 2023), Microsoft's revenue from 2012 to 2022 financial years, by segment (in billion U.S. dollars) [Graph], Microsoft, July 26, 2022. As described in our 2020 Proxy Statement, annual performance and compensation reviews of our senior leadership team include an evaluation of their contributions to employee culture and diversity. The regional center in Ireland supports the European, Middle Eastern, and African region; the center in Singapore supports the Japan, India, Greater China, and Asia-Pacific region; and the centers in Fargo, North Dakota, Fort Lauderdale, Florida, Puerto Rico, Redmond, Washington, and Reno, Nevada support Latin America and North America. They consist predominantly of highly liquid investment-grade fixed-income securities, diversified among industries and individual issuers. ZeniMax is reported as part of our More Personal Computing segment. Padmasree Warrior 2 As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. Chief Financial Officer, Gap, Inc. John W. Stanton 1,4 31.70%. Our CSR Reports Hub provides detailed information on law enforcement access to data, our environmental data, our political activities, our workforce demographics, and our human rights work. In addition, all our broker-priced investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments. Server products revenue is mainly affected by purchases through volume licensing programs, licenses sold to original equipment manufacturers (OEM), and retail packaged products. Contact Computershare directly to find out more about these services and programs at 800-285-7772, option 1, or visit online at: https://www.computershare.com/Microsoft, You can e-mail the transfer agent at: web.queries@computershare.com. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entitys financial statements or tax returns. Operating income grew 32 percent to $70 billion. These contracts are not designated as hedging instruments and are included in Other contracts in the tables below. Press releases on quarterly earnings, product and service announcements, legal developments, and international news. Great content drives Game Pass growth, and our acquisition this year of ZeniMax Media adds some of the worlds most iconic franchises to the service. Cloud usage and demand benefited as customers accelerate their digital transformation priorities. Server products revenue increased 6% driven by hybrid and premium solutions, on a strong prior year comparable that benefited from demand related to SQL Server 2008 and Windows Server 2008 end of support. Chart. Build the Intelligent Cloud and Intelligent Edge Platform. These costs are expected to be recognized over a weighted average period of three years. Certain of our employees are subject to collective bargaining agreements. Depreciation expense declined in fiscal year 2021 due to the change in estimated useful lives of our server and network equipment. Revenue from certain contracts is allocated among the segments based on the relative value of the underlying products and services, which can include allocation based on actual prices charged, prices when sold separately, or estimated costs plus a profit margin. The credit risk and average maturity of our fixed-income portfolio are managed to achieve economic returns that correlate to certain fixed-income indices. For derivative instruments designated as cash flow hedges, gains and losses are initially reported as a component of other comprehensive income and subsequently recognized in earnings with the corresponding hedged item. These manufacturers, many of which are also current or potential partners and customers, include Apple and our Windows OEMs. Founded in 1975, we develop and support software, services, devices, and solutions that deliver new value for customers and help people and businesses realize their full potential. It transforms how people connect holographically with others in a natural way. 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. Our leases have remaining lease terms of 1 year to 15 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. Our hardware is generally highly dependent on, and interrelated with, the underlying operating system and cannot function without the operating system. Following a mediation, the parties agreed to a global settlement of all three Canadian actions and submitted the proposed settlement agreement to the courts in all three jurisdictions for approval. We have savings plans in the U.S. that qualify under Section 401(k) of the Internal Revenue Code, and a number of savings plans in international locations. Azure faces diverse competition from companies such as Amazon, Google, IBM, Oracle, VMware, and open source offerings. Partners license software over a three-year period and are billed monthly based on consumption. In March 2021, the India Supreme Court ruled favorably in the case of Engineering Analysis Centre of Excellence Private Limited vs The Commissioner of Income Tax for companies in 86 separate appeals, some dating back to 2012, holding that software sales are not subject to India withholding taxes. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. [Online]. These levels are: We measure equity investments without readily determinable fair values on a nonrecurring basis. The weighted average grant-date fair value of stock awards granted was $221.13, $140.49, and $107.02 for fiscal years 2021, 2020, and 2019, respectively. Nine of these cases were filed in 2002 and are consolidated for certain pre-trial proceedings; the remaining cases are stayed. Significant judgment is exercised by the Company in determining revenue recognition for these customer agreements, and includes the following: Given these factors and due to the volume of transactions, the related audit effort in evaluating managements judgments in determining revenue recognition for these customer agreements was extensive and required a high degree of auditor judgment. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. In terms of formal on-line learning solutions, in fiscal year 2021 our employees completed over 5 million courses, averaging over 18 hours per employee. The lawsuits also allege an industry-wide conspiracy to manipulate the science and testing around emission guidelines. In our rapidly changing digital economy, people need a platform where they can acquire new skills, expand their networks, and connect with employers. Gains and losses from changes in fair values of derivatives that are not designated as hedging instruments are primarily recognized in other income (expense), net. You're reading a free article with opinions that may differ from The Motley . Our intended result is a global performance and development approach that fosters our culture, and competitive compensation that ensures equitable pay by role while supporting pay for performance. Using Windows to fuel our cloud business, grow our share of the PC market, and drive increased engagement with our services like Microsoft 365 Consumer, Teams, Edge, Bing, Xbox Game Pass, and more. Server products and cloud services revenue increased 27% driven by Azure growth of 50%. Windows 11 builds on the strengths of productivity, versatility, and security on Windows 10 today and adds in new experiences that include powerful task switching tools like new snap layouts, snap groups, and desktops; new ways to stay connected through chat; the information you want at your fingertips; and more. Critical accounting policies for us include revenue recognition, impairment of investment securities, goodwill, research and development costs, contingencies, income taxes, and inventories. The major classes of assets and liabilities to which we allocated the purchase price were as follows: The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from future growth and is not expected to be deductible for tax purposes. Our broker-priced investments are generally classified as Level 2 investments because the broker prices these investments based on similar assets without applying significant adjustments. Use Ask Statista Research Service, On April 25, 2014, Microsoft completed the transaction to acquire substantially all of Nokia Corporations Devices and Services Business (NDS). Xbox content and services revenue increased $2.3 billion or 23% driven by growth in third-party titles, Xbox Game Pass subscriptions, and first-party titles. During fiscal years 2021 and 2020, we repurchased 101 million shares and 126 million shares of our common stock for $23.0 billion and $19.7 billion, respectively, through our share repurchase programs. Shares of our common stock may be purchased by employees at three-month intervals at 90% of the fair market value on the last trading day of each three-month period. Microsoft aims to recruit, develop, and retain diverse, world-changing talent. Commercial remaining performance obligation, Commercial portion of revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, Revenue from our commercial cloud business, which includes Azure, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties, Gross margin percentage for our commercial cloud business, Productivity and Business Processes and Intelligent Cloud. 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