Goodwill and Intangible Asset Disclosure
Adjustments to Financial Statements: Removal of Goodwill
Adjusted Financial Ratios: Removal of Goodwill (Summary)
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Microsoft Corp., balance sheet: goodwill and intangible assets

US$ in millions

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Goodwill	67,886)	67,524)	49,711)	43,351)	42,026)	35,683)
Technology-based	11,245)	11,277)	9,779)	8,160)	7,691)	7,220)
Customer-related	7,281)	7,342)	4,958)	4,967)	4,709)	4,031)
Marketing-related	4,935)	4,942)	4,792)	4,158)	4,165)	4,006)
Contract-based	29)	16)	446)	474)	574)	679)
Finite-lived intangible assets, gross carrying amount	23,490)	23,577)	19,975)	17,759)	17,139)	15,936)
Accumulated amortization	(14,124)	(12,279)	(12,175)	(10,721)	(9,389)	(7,883)
Finite-lived intangible assets, net carrying amount	9,366)	11,298)	7,800)	7,038)	7,750)	8,053)
Goodwill and intangible assets	77,252)	78,822)	57,511)	50,389)	49,776)	43,736)

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
Goodwill	Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.	Microsoft Corp. goodwill increased from 2021 to 2022 and from 2022 to 2023.
Finite-lived intangible assets, net carrying amount	Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Microsoft Corp. finite-lived intangible assets, net carrying amount increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.
Goodwill and intangible assets	Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Microsoft Corp. goodwill and intangible assets increased from 2021 to 2022 but then slightly decreased 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: Goodwill	67,886)	67,524)	49,711)	43,351)	42,026)	35,683)
Total assets (adjusted)	344,090)	297,316)	284,068)	257,960)	244,530)	223,165)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	206,223)	166,542)	141,988)	118,304)	102,330)	82,718)
Less: Goodwill	67,886)	67,524)	49,711)	43,351)	42,026)	35,683)
Stockholders’ equity (adjusted)	138,337)	99,018)	92,277)	74,953)	60,304)	47,035)

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
Total Asset Turnover
Reported total asset turnover	0.51	0.54	0.50	0.47	0.44	0.43
Adjusted total asset turnover	0.62	0.67	0.59	0.55	0.51	0.49
Financial Leverage
Reported financial leverage	2.00	2.19	2.35	2.55	2.80	3.13
Adjusted financial leverage	2.49	3.00	3.08	3.44	4.05	4.74
Return on Equity (ROE)
Reported ROE	35.09%	43.68%	43.15%	37.43%	38.35%	20.03%
Adjusted ROE	52.31%	73.46%	66.40%	59.08%	65.07%	35.23%
Return on Assets (ROA)
Reported ROA	17.56%	19.94%	18.36%	14.70%	13.69%	6.40%
Adjusted ROA	21.03%	24.46%	21.57%	17.17%	16.05%	7.43%

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).

Financial 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 not reaching 2021 level.
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 net income divided by adjusted shareholders’ equity.	Microsoft Corp. adjusted ROE improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.
Adjusted ROA	A profitability ratio calculated as 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)
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 Goodwill
Selected Financial Data (US$ in millions)
Revenue	211,915)	198,270)	168,088)	143,015)	125,843)	110,360)
Adjusted total assets	344,090)	297,316)	284,068)	257,960)	244,530)	223,165)
Activity Ratio
Adjusted total asset turnover²	0.62	0.67	0.59	0.55	0.51	0.49

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 ÷ 344,090 = 0.62

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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 not reaching 2021 level.

	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 Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets	344,090)	297,316)	284,068)	257,960)	244,530)	223,165)
Adjusted stockholders’ equity	138,337)	99,018)	92,277)	74,953)	60,304)	47,035)
Solvency Ratio
Adjusted financial leverage²	2.49	3.00	3.08	3.44	4.05	4.74

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
= 344,090 ÷ 138,337 = 2.49

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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 Goodwill
Selected Financial Data (US$ in millions)
Net income	72,361)	72,738)	61,271)	44,281)	39,240)	16,571)
Adjusted stockholders’ equity	138,337)	99,018)	92,277)	74,953)	60,304)	47,035)
Profitability Ratio
Adjusted ROE²	52.31%	73.46%	66.40%	59.08%	65.07%	35.23%

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 × Net income ÷ Adjusted stockholders’ equity
= 100 × 72,361 ÷ 138,337 = 52.31%

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Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as net income divided by adjusted shareholders’ equity.	Microsoft Corp. adjusted ROE improved from 2021 to 2022 but then deteriorated significantly 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 Goodwill
Selected Financial Data (US$ in millions)
Net income	72,361)	72,738)	61,271)	44,281)	39,240)	16,571)
Adjusted total assets	344,090)	297,316)	284,068)	257,960)	244,530)	223,165)
Profitability Ratio
Adjusted ROA²	21.03%	24.46%	21.57%	17.17%	16.05%	7.43%

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

² Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × 72,361 ÷ 344,090 = 21.03%

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Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as 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 Goodwill and Intangible Assets

Goodwill and Intangible Asset Disclosure

Adjustments to Financial Statements: Removal of Goodwill

Microsoft Corp., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Microsoft Corp., Financial Ratios: Reported vs. Adjusted

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)