Stock Analysis on Net
Stock Analysis on Net

Microsoft Corp. (NASDAQ:MSFT)

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Analysis of Income Taxes

Microsoft Excel LibreOffice Calc

Income Tax Expense (Benefit)

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

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
U.S. federal
U.S. state and local
Foreign
Current taxes
U.S. federal
U.S. state and local
Foreign
Deferred taxes (legacy)
Deferred taxes
Provision for income taxes

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

Item Description The company
Current taxes Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Microsoft Corp.’s current taxes decreased from 2019 to 2020 but then increased from 2020 to 2021 not reaching 2019 level.
Deferred taxes Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Microsoft Corp.’s deferred taxes increased from 2019 to 2020 but then slightly decreased from 2020 to 2021.
Provision for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Microsoft Corp.’s provision for income taxes increased from 2019 to 2020 and from 2020 to 2021.

Effective Income Tax Rate (EITR)

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

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Federal statutory tax rate
Foreign earnings taxed at lower rates
Phone business losses
Impact of intangible property transfers
Foreign-derived intangible income deduction
State income taxes, net of federal benefit
Research and development credit
Excess tax benefits relating to stock-based compensation
Domestic production activities deduction
Interest, net
Other reconciling items, net
Effective tax rate, before impact of the enactment of the TCJA
Impact of the enactment of the TCJA
Effective tax rate

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

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.’s effective tax rate, before impact of the enactment of the TCJA increased from 2019 to 2020 but then slightly decreased from 2020 to 2021.

Components of Deferred Tax Assets and Liabilities

Microsoft Corp., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Stock-based compensation expense
Accruals, reserves, and other expenses
Other expense items
Restructuring charges
Impaired investments
Loss and credit carryforwards
Amortization
Leasing liabilities
Unearned revenue
Other
Deferred income tax assets
Valuation allowance
Deferred income tax assets, net of valuation allowance
Foreign earnings
Book/tax basis differences in investments and debt
Unearned revenue
Leasing assets
Depreciation
Deferred GILTI tax liabilities
Other
Deferred income tax liabilities
Net deferred income tax assets (liabilities)

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

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.’s deferred income tax assets decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.
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.’s deferred income tax assets, net of valuation allowance increased from 2019 to 2020 and from 2020 to 2021.
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.’s net deferred income tax assets (liabilities) decreased from 2019 to 2020 but then increased from 2020 to 2021 not reaching 2019 level.

Deferred Tax Assets and Liabilities, Classification

Microsoft Corp., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Long-term deferred income tax assets (included in Other long-term assets)
Long-term deferred income tax liabilities

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

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.’s long-term deferred income tax assets (included in Other long-term assets) decreased from 2019 to 2020 but then increased from 2020 to 2021 not reaching 2019 level.
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.’s long-term deferred income tax liabilities decreased from 2019 to 2020 and from 2020 to 2021.

Adjustments to Financial Statements: Removal of Deferred Taxes

Microsoft Corp., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Adjustment to Total Assets
Total assets (as reported)
Less: Noncurrent deferred tax assets, net
Total assets (adjusted)
Adjustment to Total Liabilities
Total liabilities (as reported)
Less: Noncurrent deferred tax liabilities, net
Total liabilities (adjusted)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)
Less: Net deferred tax assets (liabilities)
Stockholders’ equity (adjusted)
Adjustment to Net Income
Net income (as reported)
Add: Deferred income tax expense (benefit)
Net income (adjusted)

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).


Microsoft Corp., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Microsoft Corp., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Net Profit Margin
Reported net profit margin
Adjusted net profit margin
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE
Adjusted ROE
Return on Assets (ROA)
Reported ROA
Adjusted ROA

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Microsoft Corp.’s adjusted net profit margin ratio improved from 2019 to 2020 and from 2020 to 2021.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Microsoft Corp.’s adjusted total asset turnover ratio improved from 2019 to 2020 and from 2020 to 2021.
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.’s adjusted financial leverage ratio decreased from 2019 to 2020 and from 2020 to 2021.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Microsoft Corp.’s adjusted ROE improved from 2019 to 2020 and from 2020 to 2021.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Microsoft Corp.’s adjusted ROA improved from 2019 to 2020 and from 2020 to 2021.

Microsoft Corp., Financial Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
As Reported
Selected Financial Data (US$ in millions)
Net income
Revenue
Profitability Ratio
Net profit margin1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income
Revenue
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

2021 Calculations

1 Net profit margin = 100 × Net income ÷ Revenue
= 100 × ÷ =

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Revenue
= 100 × ÷ =

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Microsoft Corp.’s adjusted net profit margin ratio improved from 2019 to 2020 and from 2020 to 2021.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
As Reported
Selected Financial Data (US$ in millions)
Revenue
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenue
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

2021 Calculations

1 Total asset turnover = Revenue ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= ÷ =

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Microsoft Corp.’s adjusted total asset turnover ratio improved from 2019 to 2020 and from 2020 to 2021.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
As Reported
Selected Financial Data (US$ in millions)
Total assets
Stockholders’ equity
Solvency Ratio
Financial leverage1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted stockholders’ equity
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

2021 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= ÷ =

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.’s adjusted financial leverage ratio decreased from 2019 to 2020 and from 2020 to 2021.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
As Reported
Selected Financial Data (US$ in millions)
Net income
Stockholders’ equity
Profitability Ratio
ROE1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income
Adjusted stockholders’ equity
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

2021 Calculations

1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Microsoft Corp.’s adjusted ROE improved from 2019 to 2020 and from 2020 to 2021.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
As Reported
Selected Financial Data (US$ in millions)
Net income
Total assets
Profitability Ratio
ROA1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2021-07-29), 10-K (filing date: 2020-07-31), 10-K (filing date: 2019-08-01), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-02), 10-K (filing date: 2016-07-28).

2021 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Microsoft Corp.’s adjusted ROA improved from 2019 to 2020 and from 2020 to 2021.