Microsoft Corp. (MSFT)

Microsoft considers all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair values of these investments approximate their carrying values. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in fair value, excluding other-than-temporary impairments, are recorded in OCI. Debt investments are impaired when a decline in fair value is judged to be other-than-temporary. Fair value is calculated based on publicly available market information or other estimates determined by management. Microsoft employs a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in evaluating potential impairment of the investments. If the cost of an investment exceeds its fair value, Microsoft evaluates, among other factors, general market conditions, credit quality of debt instrument issuers, and the duration and extent to which the fair value is less than cost. Microsoft also evaluates whether Microsoft has plans to sell the security or it is more likely than not that Microsoft will be required to sell the security before recovery. In addition, Microsoft considers specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in other income (expense), net and a new cost basis in the investment is established.

Equity investments with readily determinable fair values are measured at fair value. Equity investments without readily determinable fair values are measured using the equity method, or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). Microsoft performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. Changes in value are recorded in other income (expense), net.

Microsoft lends certain fixed-income and equity securities to increase investment returns. These transactions are accounted for as secured borrowings and the loaned securities continue to be carried as investments on Microsoft’s consolidated balance sheets. Cash and/or security interests are received as collateral for the loaned securities with the amount determined based upon the underlying security lent and the creditworthiness of the borrower. Cash received is recorded as an asset with a corresponding liability.

Source: 10-K (filing date: 2019-08-01).

Microsoft Corp., adjustment to net income

US$ in millions

	12 months ended	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014
	Net income (as reported)
	Add: Net change related to investments
	Net income (adjusted)

Based on: 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), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).

Microsoft Corp., adjusted profitability ratios

		Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 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), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).

Microsoft Corp., Profitability Ratios: Reported vs. Adjusted

		Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Revenue
	Profitability Ratio
	Net profit margin1
	Adjusted: Mark to Market Available-for-sale Securities
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Revenue
	Profitability Ratio
	Adjusted net profit margin2

Based on: 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), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).

		Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Stockholders’ equity
	Profitability Ratio
	ROE1
	Adjusted: Mark to Market Available-for-sale Securities
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Stockholders’ equity
	Profitability Ratio
	Adjusted ROE2

Based on: 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), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).

		Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Total assets
	Profitability Ratio
	ROA1
	Adjusted: Mark to Market Available-for-sale Securities
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Total assets
	Profitability Ratio
	Adjusted ROA2

Based on: 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), 10-K (filing date: 2015-07-31), 10-K (filing date: 2014-07-31).