Due to the various benefits from and the nature of our SA program, judgment is required to assess the pattern of delivery, including the exercise pattern of certain benefits across our portfolio of customers. Sorry, we are unable to subscribe you. The following table presents the fair value of our derivatives instruments on a gross basis: Gains (losses) on derivative instruments recognized in our consolidated income statements were as follows: Gains (losses), net of tax, on derivative instruments recognized in our consolidated comprehensive income statements were as follows: The components of inventories were as follows: The components of property and equipment were as follows: During fiscal years 2020, 2019, and 2018, depreciation expense was $10.7 billion, $9.7 billion, and $7.7 billion, respectively. The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. In evaluating estimated losses on these obligations, we consider factors such as the degree of probability of an unfavorable outcome and our ability to make a reasonable estimate of the amount of loss. Announcements of investor conferences, speeches, and events at which our executives talk about our product, service, and competitive strategies. So organizations can empower their employees, fostering a new culture for hybrid work; engage customers intelligently and virtually; transform products with new business models; and optimize operations to keep customers and employees safe and secure. Nine of these cases were filed in 2002 and are consolidated for certain pre-trial proceedings; the remaining cases are stayed. When cloud services require a significant level of integration and interdependency with software and the individual components are not considered distinct, all revenue is recognized over the period in which the cloud services are provided. Rotary in Action. Contact Computershare directly to find out more about these services and programs at 800-285-7772, option 1, or visit online at: https://www.computershare.com/Microsoft, You can e-mail the transfer agent at: [email protected]. The data feeds into internal and external reporting and tracks against contract incentives and tender evaluation criteria. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are released to production. To protect the health and well-being of our employees, suppliers, and customers, we have made substantial modifications to employee travel policies, implemented office closures as employees are advised to work from home, and cancelled or shifted our conferences and other marketing events to virtual-only through fiscal year 2021. Our success is highly dependent on our ability to attract and retain qualified employees. These contracts are not designated as hedging instruments and are included in “Other contracts” in the tables below. In addition, we consider 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. It starts with a belief that everyone can grow and develop; that potential is nurtured, not predetermined; and that anyone can change their mindset. COVID-19 has underscored that without a healthy society, we cannot sustain a healthy economy. Gross margin increased $10.9 billion or 15%, driven by growth across each of our segments. Adaptability. Gross margin percentage was relatively unchanged, due to gross margin percentage improvement in LinkedIn, offset in part by an increased mix of cloud offerings. Unearned revenue also includes payments for consulting services to be performed in the future; LinkedIn subscriptions; Office 365 subscriptions; Xbox Live subscriptions; Windows 10 post-delivery support; Dynamics business solutions; Skype prepaid credits and subscriptions; and other offerings for which we have been paid in advance and earn the revenue when we transfer control of the product or service. We also settled a portion of the IRS audit for tax years 2007 to 2009 in fiscal year 2016, and a portion of the IRS audit for tax years 2010 to 2013 in fiscal year 2018. In February 2012, the IRS withdrew its 2011 Revenue Agents Report related to unresolved issues for tax years 2004 to 2006 and reopened the audit phase of the examination. In a time of great disruption and uncertainty, customers are looking to us to accelerate their own digital transformations as software and cloud computing play a huge role across every industry and around the world. Third, we must protect our most finite resource—the planet—by working toward a more sustainable future. We also deliver relevant online advertising to a global audience. Search advertising revenue, excluding traffic acquisition costs, was relatively unchanged. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Microsoft Relationship Sales solution brings together LinkedIn Sales Navigator and Dynamics to transform business to business sales through social selling. Revenue related to cloud services provided on a subscription basis is recognized ratably over the contract period. The increase in our effective tax rate for fiscal year 2020 compared to fiscal year 2019 was primarily due to a $2.6 billion net income tax benefit in the fourth quarter of fiscal year 2019 related to intangible property transfers. We strive to make computing more personal by putting users at the core of the experience, enabling them to interact with technology in more intuitive, engaging, and dynamic ways. Activity in the allowance for doubtful accounts was as follows: Allowance for doubtful accounts included in our consolidated balance sheets: Unearned revenue comprises mainly unearned revenue related to volume licensing programs, which may include SA and cloud services. In addition, all our broker-priced investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Non-GAAP net income and diluted EPS are non-GAAP financial measures which exclude the net tax impact of transfer of intangible properties in fiscal year 2019 and the net tax impact of the TCJA in fiscal years 2019 and 2018. Our customers see this urgent need and are looking to us—in partnership with them—to take action. Our hardware is generally highly dependent on, and interrelated with, the underlying operating system and cannot function without the operating system. Business, and Chief Marketing Officer, Amy E. Hood Search advertising revenue increased $112 million or 1%. Adjustments to reconcile net income to net cash from operations: Net recognized gains on investments and derivatives. No instances of impairment were identified in our May 1, 2020, May 1, 2019, or May 1, 2018 tests. These manufacturers, many of which are also current or potential partners and customers, include Apple and our Windows OEMs. Windows 10 serves the enterprise as the most secure and productive operating system. Cybercrime will cost businesses, governments, and individuals $1 trillion this year, and the shift to remote everything has only increased the need for a “Zero Trust” architecture that reduces both cost and complexity. We also compete with other providers of entertainment services such as Netflix and Hulu. Our strategy requires continued investment in datacenters and other hybrid and edge infrastructure to support our services. The competitive position of Linux has also benefited from the large number of compatible applications now produced by many commercial and non-commercial software developers. Inventing new gaming experiences that bring people together around their shared love for games on any devices and pushing the boundaries of innovation with console and PC gaming by creating the next wave of entertainment. Build the Intelligent Cloud and Intelligent Edge Platform. I’m proud of how our ecosystem of customers and partners has stepped up over the past year to help people and organizations in every country use technology to be resilient and transform during the most trying of circumstances. The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. You have already signed up to our newsletter. We believe our people should have the opportunity to fulfil their potential and thrive in an inclusive and diverse workplace. With GitHub, more than 50 million developers across 3 million organizations, including the majority of the Fortune 50, are able to collaborate and build software together. We contribute fifty cents for each dollar a participant contributes into the plans, with a maximum employer contribution of 50% of the IRS contribution limit for the calendar year. VIEW ONLINE. Under Open Value agreements, organizations can elect to purchase perpetual licenses or subscribe to licenses and SA is included. Additionally, we have agreed to cover damages resulting from breaches of certain security and privacy commitments in our cloud business. Officer, Marriott International, Inc. Reid G. Hoffman Human Resources, Christopher C. Capossela The federal and state net operating loss carryforwards will expire in various years from fiscal 2021 through 2040, if not utilized. 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