Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Microsoft Corp., income tax expense (benefit), continuing operations

US$ in millions

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
U.S. federal	14,009)	8,329)	3,285)	3,537)	4,718)	19,764)
U.S. state and local	2,322)	1,679)	1,229)	763)	662)	934)
Foreign	6,678)	6,672)	5,467)	4,444)	5,531)	4,348)
Current taxes	23,009)	16,680)	9,981)	8,744)	10,911)	25,046)
U.S. federal	(6,146)	(4,815)	25)	58)	(5,647)	(4,292)
U.S. state and local	(477)	(1,062)	(204)	(6)	(1,010)	(458)
Foreign	564)	175)	29)	(41)	194)	(393)
Deferred taxes	(6,059)	(5,702)	(150)	11)	(6,463)	(5,143)
Provision for income taxes	16,950)	10,978)	9,831)	8,755)	4,448)	19,903)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

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Item	Description	The company
Current taxes	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Microsoft Corp. current taxes increased from 2021 to 2022 and from 2022 to 2023.
Deferred taxes	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Microsoft Corp. deferred taxes decreased from 2021 to 2022 and from 2022 to 2023.
Provision for income taxes	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Microsoft Corp. provision for income taxes increased from 2021 to 2022 and from 2022 to 2023.

Microsoft Corp., effective income tax rate (EITR) reconciliation

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
U.S. federal statutory tax rate	21.00%	21.00%	21.00%	21.00%	21.00%	28.10%
Foreign earnings taxed at lower rates	-1.80%	-1.30%	-2.70%	-3.70%	-4.10%	-7.80%
Impact of intangible property transfers	0.00%	-3.90%	0.00%	0.00%	-5.90%	0.00%
Foreign-derived intangible income deduction	-1.30%	-1.10%	-1.30%	-1.10%	-1.40%	0.00%
State income taxes, net of federal benefit	1.60%	1.40%	1.40%	1.30%	0.70%	1.30%
Research and development credit	-1.10%	-0.90%	-0.90%	-1.10%	-1.10%	-1.30%
Excess tax benefits relating to stock-based compensation	-0.70%	-1.90%	-2.40%	-2.20%	-2.20%	-2.50%
Interest, net	0.80%	0.50%	0.50%	1.00%	1.00%	1.20%
Other reconciling items, net	0.50%	-0.70%	-1.80%	1.30%	1.80%	-2.10%
Effective tax rate, before impact of the enactment of the TCJA	19.00%	13.10%	13.80%	16.50%	9.80%	16.90%
Impact of the enactment of the TCJA	0.00%	0.00%	0.00%	0.00%	0.40%	37.70%
Effective tax rate	19.00%	13.10%	13.80%	16.50%	10.20%	54.60%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

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Item	Description	The company
Effective tax rate, before impact of the enactment of the TCJA	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Microsoft Corp. effective tax rate, before impact of the enactment of the TCJA decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Microsoft Corp., components of deferred tax assets and liabilities

US$ in millions

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Stock-based compensation expense	681)	601)	502)	461)	406)	460)
Accruals, reserves, and other expenses	3,131)	2,874)	2,960)	2,721)	2,287)	1,832)
Loss and credit carryforwards	1,441)	1,546)	1,090)	865)	3,518)	3,369)
Amortization	9,440)	10,183)	6,346)	6,361)	7,046)	351)
Leasing liabilities	5,041)	4,557)	4,060)	3,025)	1,594)	—)
Unearned revenue	3,296)	2,876)	2,659)	1,553)	475)	—)
Book/tax basis differences in investments and debt	373)	—)	—)	—)	—)	—)
Capitalized research and development	6,958)	473)	—)	—)	—)	—)
Other	489)	461)	543)	354)	367)	56)
Deferred income tax assets	30,850)	23,571)	18,160)	15,340)	15,693)	6,068)
Valuation allowance	(939)	(1,012)	(769)	(755)	(3,214)	(3,186)
Deferred income tax assets, net of valuation allowance	29,911)	22,559)	17,391)	14,585)	12,479)	2,882)
Book/tax basis differences in investments and debt	—)	(174)	(2,605)	(2,642)	(738)	—)
Unearned revenue	—)	—)	—)	—)	(30)	(639)
Leasing assets	(4,680)	(4,291)	(3,834)	(2,817)	(1,510)	—)
Depreciation	(2,674)	(1,602)	(1,010)	—)	—)	(1,103)
Deferred tax on foreign earnings	(2,738)	(3,104)	(2,815)	(2,581)	(2,607)	(61)
Other	(89)	(103)	(144)	(344)	(291)	(251)
Deferred income tax liabilities	(10,181)	(9,274)	(10,408)	(8,384)	(5,176)	(2,054)
Net deferred income tax assets (liabilities)	19,730)	13,285)	6,983)	6,201)	7,303)	828)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

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Item	Description	The company
Deferred income tax assets	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Microsoft Corp. deferred income tax assets increased from 2021 to 2022 and from 2022 to 2023.
Deferred income tax assets, net of valuation allowance	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Microsoft Corp. deferred income tax assets, net of valuation allowance increased from 2021 to 2022 and from 2022 to 2023.
Net deferred income tax assets (liabilities)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Microsoft Corp. net deferred income tax assets (liabilities) increased from 2021 to 2022 and from 2022 to 2023.

Microsoft Corp., deferred tax assets and liabilities, classification

US$ in millions

		Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
	Long-term deferred income tax assets (included in Other long-term assets)	20,163)	13,515)	7,181)	6,405)	7,536)	1,369)
	Long-term deferred income tax liabilities	433)	230)	198)	204)	233)	541)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

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Item	Description	The company
Long-term deferred income tax assets (included in Other long-term assets)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Microsoft Corp. long-term deferred income tax assets (included in Other long-term assets) increased from 2021 to 2022 and from 2022 to 2023.
Long-term deferred income tax liabilities	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	Microsoft Corp. long-term deferred income tax liabilities increased from 2021 to 2022 and from 2022 to 2023.

Microsoft Corp., adjustments to financial statements

US$ in millions

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Adjustment to Total Assets
Total assets (as reported)	411,976)	364,840)	333,779)	301,311)	286,556)	258,848)
Less: Noncurrent deferred tax assets, net	20,163)	13,515)	7,181)	6,405)	7,536)	1,369)
Total assets (adjusted)	391,813)	351,325)	326,598)	294,906)	279,020)	257,479)
Adjustment to Total Liabilities
Total liabilities (as reported)	205,753)	198,298)	191,791)	183,007)	184,226)	176,130)
Less: Noncurrent deferred tax liabilities, net	433)	230)	198)	204)	233)	541)
Total liabilities (adjusted)	205,320)	198,068)	191,593)	182,803)	183,993)	175,589)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	206,223)	166,542)	141,988)	118,304)	102,330)	82,718)
Less: Net deferred tax assets (liabilities)	19,730)	13,285)	6,983)	6,201)	7,303)	828)
Stockholders’ equity (adjusted)	186,493)	153,257)	135,005)	112,103)	95,027)	81,890)
Adjustment to Net Income
Net income (as reported)	72,361)	72,738)	61,271)	44,281)	39,240)	16,571)
Add: Deferred income tax expense (benefit)	(6,059)	(5,702)	(150)	11)	(6,463)	(5,143)
Net income (adjusted)	66,302)	67,036)	61,121)	44,292)	32,777)	11,428)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

Microsoft Corp., Financial Data: Reported vs. Adjusted

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Microsoft Corp., adjusted financial ratios

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Net Profit Margin
Reported net profit margin	34.15%	36.69%	36.45%	30.96%	31.18%	15.02%
Adjusted net profit margin	31.29%	33.81%	36.36%	30.97%	26.05%	10.36%
Total Asset Turnover
Reported total asset turnover	0.51	0.54	0.50	0.47	0.44	0.43
Adjusted total asset turnover	0.54	0.56	0.51	0.48	0.45	0.43
Financial Leverage
Reported financial leverage	2.00	2.19	2.35	2.55	2.80	3.13
Adjusted financial leverage	2.10	2.29	2.42	2.63	2.94	3.14
Return on Equity (ROE)
Reported ROE	35.09%	43.68%	43.15%	37.43%	38.35%	20.03%
Adjusted ROE	35.55%	43.74%	45.27%	39.51%	34.49%	13.96%
Return on Assets (ROA)
Reported ROA	17.56%	19.94%	18.36%	14.70%	13.69%	6.40%
Adjusted ROA	16.92%	19.08%	18.71%	15.02%	11.75%	4.44%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Microsoft Corp. adjusted net profit margin ratio deteriorated from 2021 to 2022 and from 2022 to 2023.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Microsoft Corp. adjusted total asset turnover ratio improved from 2021 to 2022 but then slightly deteriorated from 2022 to 2023.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Microsoft Corp. adjusted financial leverage ratio decreased from 2021 to 2022 and from 2022 to 2023.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Microsoft Corp. adjusted ROE deteriorated from 2021 to 2022 and from 2022 to 2023.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Microsoft Corp. adjusted ROA improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Microsoft Corp., Financial Ratios: Reported vs. Adjusted

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	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income	72,361)	72,738)	61,271)	44,281)	39,240)	16,571)
Revenue	211,915)	198,270)	168,088)	143,015)	125,843)	110,360)
Profitability Ratio
Net profit margin¹	34.15%	36.69%	36.45%	30.96%	31.18%	15.02%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income	66,302)	67,036)	61,121)	44,292)	32,777)	11,428)
Revenue	211,915)	198,270)	168,088)	143,015)	125,843)	110,360)
Profitability Ratio
Adjusted net profit margin²	31.29%	33.81%	36.36%	30.97%	26.05%	10.36%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

¹ Net profit margin = 100 × Net income ÷ Revenue
= 100 × 72,361 ÷ 211,915 = 34.15%

² Adjusted net profit margin = 100 × Adjusted net income ÷ Revenue
= 100 × 66,302 ÷ 211,915 = 31.29%

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Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Microsoft Corp. adjusted net profit margin ratio deteriorated from 2021 to 2022 and from 2022 to 2023.

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Revenue	211,915)	198,270)	168,088)	143,015)	125,843)	110,360)
Total assets	411,976)	364,840)	333,779)	301,311)	286,556)	258,848)
Activity Ratio
Total asset turnover¹	0.51	0.54	0.50	0.47	0.44	0.43
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenue	211,915)	198,270)	168,088)	143,015)	125,843)	110,360)
Adjusted total assets	391,813)	351,325)	326,598)	294,906)	279,020)	257,479)
Activity Ratio
Adjusted total asset turnover²	0.54	0.56	0.51	0.48	0.45	0.43

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

¹ Total asset turnover = Revenue ÷ Total assets
= 211,915 ÷ 411,976 = 0.51

² Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= 211,915 ÷ 391,813 = 0.54

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Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Microsoft Corp. adjusted total asset turnover ratio improved from 2021 to 2022 but then slightly deteriorated from 2022 to 2023.

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Total assets	411,976)	364,840)	333,779)	301,311)	286,556)	258,848)
Stockholders’ equity	206,223)	166,542)	141,988)	118,304)	102,330)	82,718)
Solvency Ratio
Financial leverage¹	2.00	2.19	2.35	2.55	2.80	3.13
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	391,813)	351,325)	326,598)	294,906)	279,020)	257,479)
Adjusted stockholders’ equity	186,493)	153,257)	135,005)	112,103)	95,027)	81,890)
Solvency Ratio
Adjusted financial leverage²	2.10	2.29	2.42	2.63	2.94	3.14

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 411,976 ÷ 206,223 = 2.00

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 391,813 ÷ 186,493 = 2.10

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Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Microsoft Corp. adjusted financial leverage ratio decreased from 2021 to 2022 and from 2022 to 2023.

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income	72,361)	72,738)	61,271)	44,281)	39,240)	16,571)
Stockholders’ equity	206,223)	166,542)	141,988)	118,304)	102,330)	82,718)
Profitability Ratio
ROE¹	35.09%	43.68%	43.15%	37.43%	38.35%	20.03%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income	66,302)	67,036)	61,121)	44,292)	32,777)	11,428)
Adjusted stockholders’ equity	186,493)	153,257)	135,005)	112,103)	95,027)	81,890)
Profitability Ratio
Adjusted ROE²	35.55%	43.74%	45.27%	39.51%	34.49%	13.96%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

¹ ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 72,361 ÷ 206,223 = 35.09%

² Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × 66,302 ÷ 186,493 = 35.55%

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Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Microsoft Corp. adjusted ROE deteriorated from 2021 to 2022 and from 2022 to 2023.

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income	72,361)	72,738)	61,271)	44,281)	39,240)	16,571)
Total assets	411,976)	364,840)	333,779)	301,311)	286,556)	258,848)
Profitability Ratio
ROA¹	17.56%	19.94%	18.36%	14.70%	13.69%	6.40%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income	66,302)	67,036)	61,121)	44,292)	32,777)	11,428)
Adjusted total assets	391,813)	351,325)	326,598)	294,906)	279,020)	257,479)
Profitability Ratio
Adjusted ROA²	16.92%	19.08%	18.71%	15.02%	11.75%	4.44%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × 72,361 ÷ 411,976 = 17.56%

² Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × 66,302 ÷ 391,813 = 16.92%

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Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Microsoft Corp. adjusted ROA improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Microsoft Corp. (NASDAQ:MSFT)

Analysis of Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Adjustments to Financial Statements: Removal of Deferred Taxes

Microsoft Corp., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Microsoft Corp., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)