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Revenue related to our Xbox 360 gaming and entertainment console, Kinect for Xbox 360, games published by us, and other hardware components is generally recognized when ownership is transferred to the resellers. #Current cost basis of measurement software#Revenue for software products where customers have the right to receive unspecified upgrades/enhancements on a when-and-if-available basis and for which vendor-specific objective evidence of fair value does not exist for the upgrades/enhancements is recognized on a straight-line basis over the estimated life of the software. Revenue from certain arrangements that allow for the use of a product or service over a period of time without taking possession of software are also accounted for as subscriptions. #Current cost basis of measurement license#The revenue allocation is based on vendor-specific objective evidence of fair value of the products.Ĭertain multi-year licensing arrangements include a perpetual license for current products combined with rights to receive future versions of software products on a when-and-if-available basis ("Software Assurance") and are accounted for as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the billing coverage period. #Current cost basis of measurement free#Revenue for products under technology guarantee programs, which provide free or significantly discounted rights to use upcoming new versions of a software product if an end user licenses existing versions of the product during the eligibility period, is allocated between existing product and the new product, and revenue allocated to the new product is deferred until that version is delivered. ![]() Revenue for retail packaged products, products licensed to original equipment manufacturers ("OEMs"), and perpetual licenses under certain volume licensing programs generally is recognized as products are shipped or made available. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. Translation adjustments resulting from this process are recorded to Other Comprehensive Income ("OCI"). Revenue and expenses are translated at average rates of exchange prevailing during the year. Foreign CurrenciesĪssets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Actual results and outcomes may differ from management's estimates and assumptions. 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 in our financial statements or tax returns and determining when investment impairments are other-than-temporary. Examples of estimates include: loss contingencies product warranties the fair value of, and/or potential goodwill impairment for, our reporting units product life cycles useful lives of our tangible and intangible assets allowances for doubtful accounts allowances for product returns and stock-based compensation forfeiture rates. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Investments through which we are not able to exercise significant influence over the investee and which do not have readily determinable fair values are accounted for under the cost method. Equity investments through which we exercise significant influence over but do not control the investee and are not the primary beneficiary of the investee's activities are accounted for using the equity method. ![]() Intercompany transactions and balances have been eliminated. The financial statements include the accounts of Microsoft Corporation and its subsidiaries. The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. Accounting Policies NOTES TO FINANCIAL STATEMENTS NOTE 1 - ACCOUNTING POLICIES Accounting Principles ![]()
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