We record a receivable related to revenue recognized for multi-year on-premises licenses as we have an unconditional right to invoice and receive payment in the future related to those licenses. $ 33,773. Together with our partners, we have reached more than 47 million people to date, across 250 countries, but the work doesnt stop there. Net realizable value is the estimated selling price less estimated costs of completion, disposal, and transportation. Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements. Changes in operating assets and liabilities: Acquisition of companies, net of cash acquired, and purchases of intangible and other assets, Effect of foreign exchange rates on cash and cash equivalents, Cash and cash equivalents, beginning of period, Accounts receivable, net of allowance for doubtful accounts, Net income available for common shareholders (A), Weighted average outstanding shares of common stock (B), Common stock and common stock equivalents (C), Realized gains from sales of available-for-sale securities, Realized losses from sales of available-for-sale securities, Impairments and allowance for credit losses, Net unrealized gains on investments still held, Gross amounts of derivatives offset in the balance sheet, Amount reclassified from accumulated other comprehensive income, Cash, cash equivalents, and short-term investments, Foreign-derived intangible income deduction, State income taxes, net of federal benefit, Excess tax benefits relating to stock-based compensation, Deferred income tax assets, net of valuation allowance, Book/tax basis differences in investments and debt, Long-term deferred income tax liabilities, Increases for tax positions related to the current year, Increases for tax positions related to prior years, Decreases for tax positions related to prior years, Decreases due to lapsed statutes of limitations. In 2014, Microsoft was informed that Chinas State Agency for Market Regulation (SAMR) (formerly State Administration for Industry and Commerce) had begun a formal investigation relating to Chinas Anti-Monopoly Law, and the SAMR conducted onsite inspections of Microsoft offices in Beijing, Shanghai, Guangzhou, and Chengdu. Our devices are primarily manufactured by third-party contract manufacturers. These financial statements are the responsibility of the Companys management. Activity in the allowance for doubtful accounts was as follows: Allowance for doubtful accounts included in our consolidated balance sheets: We record financing receivables when we offer certain of our customers the option to acquire our software products and services offerings through a financing program in a limited number of countries. Our More Personal Computing segment consists of products and services that put customers at the center of the experience with our technology. During the periods presented, we reported our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. us-gaap:OperatingIncomeLoss. Cash paid for interest on our debt for fiscal years 2021, 2020, and 2019 was $2.0 billion, $2.4 billion, and $2.4 billion, respectively. Equity investments without readily determinable fair values are written down to fair value if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than carrying value. , Jan 12, 2023. Although it may be difficult to imagine in this time of immeasurable hardship and deep uncertainty, I see boundless possibility ahead. Business, and Chief Marketing Officer, Christopher D. Young The fair value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology. Register in seconds and access exclusive features. October 12, 2021. Our hardware is generally highly dependent on, and interrelated with, the underlying operating system and cannot function without the operating system. Inventories are stated at average cost, subject to the lower of cost or net realizable value. 88% of employees globally participated in our fiscal year 2021 MS Poll engagement survey, which covers a variety of topics such as inclusion, pay and benefits, and learning and development. We have operating and finance leases for datacenters, corporate offices, research and development facilities, Microsoft Experience Centers, and certain equipment. And it underlies our approach to diversity and inclusion. Azure Synapse brings together data integration, data warehousing, and big data analytics so organizations can query data on their own terms at any scale. Satya Nadella . Our customers include individual consumers, small and medium organizations, large global enterprises, public-sector institutions, Internet service providers, application developers, and OEMs. Growth depends on our ability to attract new users, understand intent, and match intent with relevant content and advertiser offerings. In Q2 FY 2022, productivity and business processes generated $15.9 billion in revenue, comprising 31% of Microsoft's total revenue. $59.66B. Economic Conditions, Challenges, and Risks. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. We have determined that certain sales incentive programs meet the requirements to be capitalized. Localizing a product may require modifying the user interface, altering dialog boxes, and translating text. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. Our Internet address is www.microsoft.com. We design and sell devices, including Surface and PC accessories. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and the related notes (collectively referred to as the financial statements) as of and for the year ended June 30, 2021, of the Company and our report dated July 29, 2021, expressed an unqualified opinion on those financial statements. Finally, we believe transparency is the foundation of trust, so we continue to offer clear information on how we run our business and work with customers and partners. Analysts had expected a 41.4% growth in Azure, according to consensus data from . Stock-based compensation expense and related income tax benefits were as follows: Stock awards entitle the holder to receive shares of Microsoft common stock as the award vests. The best of the best: the portal for top lists & rankings: Strategy and business building for the data-driven economy: Industry-specific and extensively researched technical data (partially from exclusive partnerships). Equity investments were $6.0 billion and $3.0 billion as of June 30, 2021 and 2020, respectively. Press releases on quarterly earnings, product and service announcements, legal developments, and international news. Executive Vice President, Chief Commercial Officer, Bradford L. Smith Are you interested in testing our business solutions? Net income fell 12% to . This segment primarily comprises: The Windows operating system is designed to deliver a more personal computing experience for users by enabling consistency of experience, applications, and information across their devices. Refer to Managements Discussion and Analysis of Financial Condition and Results of Operations for further discussion regarding the impact of COVID-19 on our fiscal year 2021 financial results. Product and Service Development, and Intellectual Property. Windows OEM Pro revenue decreased 9% and Windows OEM non-Pro revenue grew 21%. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets in our consolidated balance sheets. We aspire to create a culture where employees are encouraged to be curious, to experiment, and to share things they learn. A year later, 2022 Q4 concluded with a gross profit margin of 24%, an improvement of over 800 basis points. During fiscal year 2020, we recorded an impairment charge of $186 million to Property and Equipment, primarily to leasehold improvements, due to the closing of our Microsoft Store physical locations. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (May 1 for us) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. As the world continues to respond to COVID-19, we are working to do our part by ensuring the safety of our employees, striving to protect the health and well-being of the communities in which we operate, and providing technology and resources to our customers to help them do their best work while remote. The transfers of intangible properties resulted in a $2.6 billion net income tax benefit recorded in the fourth quarter of fiscal year 2019, as the value of future tax deductions exceeded the current tax liability from foreign jurisdictions and U.S. global intangible low-taxed income (GILTI) tax. Microsoft aims to recruit, develop, and retain diverse, world-changing talent. In fiscal years 2019, our foreign regional operating centers in Ireland, Singapore, and Puerto Rico, which are taxed at rates lower than the U.S. rate, generated 82% of our foreign income before tax, respectively. During the past year, our partner OpenAI achieved dramatic advances training models like GPT-3the largest and most advanced language model in the worldon our Azure AI supercomputer. These contracts are not designated as hedging instruments and are included in Other contracts in the tables below. We use metrics in assessing the performance of our business and to make informed decisions regarding the allocation of resources. July 26, 2022. This growth mindset served us well during the past year of crisis, disruption, and transformation. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Managers evaluate and recommend rewards based on, for example, how well we leverage the work of others and contribute to the success of our colleagues. 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. For derivative instruments that are not designated as hedges, gains and losses from changes in fair values are primarily recognized in other income (expense), net. Debt in the table above is comprised of senior unsecured obligations and ranks equally with our other outstanding obligations. The decrease from the federal statutory rate in fiscal year 2020 is primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland and Puerto Rico, and tax benefits relating to stock-based compensation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. While it may be necessary in the future to seek or renew licenses relating to various aspects of our products, services, and business methods, we believe, based upon past experience and industry practice, such licenses generally can be obtained on commercially reasonable terms. The components of lease expense were as follows: Supplemental cash flow information related to leases was as follows: Supplemental balance sheet information related to leases was as follows: The following table outlines maturities of our lease liabilities as of June 30, 2021: As of June 30, 2021, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $5.4 billion and $7.3 billion, respectively. We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. Server products and cloud services revenue increased $11.2 billion or 27% driven by Azure. How we develop and use AI is also a critical component of trust. Capitalized software development costs are amortized over the estimated lives of the products. Opportunities include: Our employees embrace the growth mindset and take advantage of the formal learning opportunities as well as thousands of informal and on-the-job learning opportunities. This included a commitment to invest $1 billion over four years in new technologies and innovative climate solutions. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements. It also provides support, tools, training, and other licensing benefits to help customers deploy and use software efficiently. 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