Stock-based compensation expense and related income tax benefits were as follows: Stock awards entitle the holder to receive shares of Microsoft common stock as the award vests. Server products revenue increased 6%, due to continued demand for premium versions and hybrid solutions, GitHub, and demand ahead of end-of-support for SQL Server 2008 and Windows Server 2008. Determination of whether products and services are considered distinct performance obligations that should be accounted for separately versus together, such as software licenses and related services that are sold with cloud-based services. Server products revenue increased 8%, due to hybrid and premium solutions, as well as demand related to SQL Server 2008 and Windows Server 2008 end of support. As we continue our own accessibility journey, we seek to inspire and enable others to advance theirs, including through our five-year investment in AI for Accessibility. Founded in 1975, we develop and support software, services, devices, and solutions that deliver new value for customers and help people and businesses realize their full potential. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital. Download the full report . Our products for software developers compete against offerings from Adobe, IBM, Oracle, and other companies, and also against open-source projects, including Eclipse (sponsored by CA Technologies, IBM, Oracle, and SAP), PHP, and Ruby on Rails. Compensation expense for the employee stock purchase plan (âESPPâ) is measured as the discount the employee is entitled to upon purchase and is recognized in the period of purchase. Diageo completes acquisition of Aviation Gin LLC and Davos Brands LLC. For Microsoft, trust is built on privacy, security, the responsible use of AI, and transparency. Partners license software over a three-year period and are billed monthly based on consumption. Surface revenue increased $457 million or 8%, driven by increased demand from remote work and learn scenarios. Financial Officer, Jean-Philippe Courtois The amortization of these costs is included in cost of revenue over the estimated life of the products. Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities. ANNUAL REPORTS. Building and running cloud-based services in ways that unleash new experiences and opportunities for businesses and individuals. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. In security, Defender offers broad coverage, spanning identities, cloud apps, devices, IoT, and more. Their new GPT-3 model was trained on our Azure AI supercomputer and constitutes a new breakthrough in natural language understanding and generation, promising breakthrough scenarios within our products and those of our customers, when safely deployed. We have committed $5.0 billion for the construction of new buildings, building improvements, and leasehold improvements as of June 30, 2020. We invite you to submit any questions via the proxy voting site at www.proxyvote.com. Finally, we need to actively seek diversity and embrace inclusion to best serve our customers around the world and create a culture where everyone can do their best work. The Companyâs long-term income taxes liability includes uncertain tax positions related to transfer pricing issues that remain unresolved with the Internal Revenue Service (âIRSâ). The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. Locations. These scenarios represent a move to unlock creativity and discover new habits, while simplifying security and management. The easiest way is to search by name. The standard will be effective for us beginning July 1, 2021, with early adoption permitted. No instances of impairment were identified in our May 1, 2020, May 1, 2019, or May 1, 2018 tests. Revenue from consulting services is recognized as services are provided. In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine the fair value of our financial instruments. Conclusions on recognizing and measuring uncertain tax positions involve significant estimates and management judgment and include complex considerations of the Internal Revenue Code, related regulations, tax case laws, and prior-year audit settlements. Click below to view our 2020 Annual Report. PDF 555KB 10,487KB 2014. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Windows Commercial revenue often reflects the number of information workers in a licensed enterprise and is relatively independent of the number of PCs sold in a given year. Gross margin increased $4.8 billion or 22%, driven by growth in server products and cloud services revenue and cloud services scale and efficiencies. Once an investment is determined to be impaired, an impairment charge is recorded in other income (expense), net. In fiscal year 2020, we removed $2.0 billion of foreign net operating losses and corresponding valuation allowances as a result of the liquidation of a foreign subsidiary. We also evaluate whether we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Identification and treatment of contract terms that may impact the timing and amount of revenue recognized (e.g., variable consideration, optional purchases, and free services). FINANCIAL INFORMATION Annual Reports Quarterly Reports Key Figures (Annual & … Type of Business by Department . Strengthening of the U.S. dollar relative to certain foreign currencies reduced reported revenue and expenses from our international operations in fiscal year 2020. During fiscal year 2020, we recorded an impairment charge of $161 million to operating lease right-of-use assets due to the closing of our Microsoft Store physical locations. For derivative instruments that are not designated as hedges, gains and losses from changes in fair values are primarily recognized in other income (expense), net. The way people interact with businesses is fundamentally shifting, and there is no going back. All other shares repurchased were under the share repurchase program approved on September 20, 2016. Server products and cloud services revenue increased 27%, driven by Azure growth of 56%. Gross margin percentage increased, due to sales mix shift to higher margin businesses and gross margin percentage improvement in Gaming. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. Securities held in our equity investments portfolio are subject to market price risk. Certain income and expenses are not reported in tax returns and financial statements in the same year. Our devices are primarily manufactured by third-party contract manufacturers. Enterprise Services revenue increased $285 million or 5%, driven by growth in Premier Support Services. Skype for Business and Skype also compete with a variety of instant messaging, voice, and video communication providers, ranging from start-ups to established enterprises. An overview and the detailed business and financial reviews for the year, reports of the directors including reports of the audit & risk committee, nominations committee, the report on directors' remuneration and the audited consolidated financial statements of BT Group plc. On December 22, 2017, the TCJA was enacted into law, which significantly changed existing U.S. tax law and included numerous provisions that affect our business. 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