Case 1 Essay

857 Words Apr 11th, 2012 4 Pages
The first case
Microsoft’s Financial Reporting Strategy

Brief Summary
Under the background that Microsoft Corporation announced to be under investigation by the Securities and Exchange Commission (SEC) for certain accounting practices, this case explores the Microsoft’s financial reporting strategy related to two policies through two accounting issues – software capitalization and revenue recognition. Analyzing the performance of its stock, annual income statement, balance sheets, cash flow and some other data, the company was found that it selects relatively conservative accounting methods. In addition, it discusses the issue of managing analysts’ expectations and the reasons why Microsoft choose conservative strategy. Furthermore,
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871 + 1304.10 - 765.10 = 5410 million | | Adjusted net income = Net income for + 1997's R&D expense - Amortization of research asset | = 3454 +1304.10 - 765.10 = 3993 million | Value of research asset of 1997 = 1768.20 million | Adjust book value of equity for 1997= Adjusted book value of capital for 1997 = Book value of equity for 1997 + Value of research asset | = 10777 + 1768.20 = 12545.2 million | | Similarly,For 1998: | | | | | | | | | Adjusted operating earnings = Operating earnings for 1998 + 1998's R&D expense | | - Amortization of research asset | | | = 6414 + 1820.70 - 1116.15 = 7118.55 million | | Adjusted net income = Net income for 1998 + 1998's R&D expense - Amortization of research asset | = 4490 + 1820.70 - 1116.15 = 5194.55 million | Value of research asset of 1998 = 2472.75 million | | | | | Adjust book value of equity of 1998 = Adjusted book value of capital for 1997= Book value of equity for 1998 + Value of research asset | = 16627 + 2472.75 = 19099.75 million | | | For the year 1999: | | | | | | | | | Adjusted operating earnings = Operating earnings for 1999 + 1999's R&D expense | | - Amortization of

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