Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Microsoft Case Study

No description
by

Adam Carswell

on 7 June 2014

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Microsoft Case Study

SEC Investigation (1999)
The Beginning of Microsoft
Conclusion
Microsoft Corporation
Microsoft Reporting Strategy
Introduction
Revenue and operating income grew an average of 43% to 49% per year.
Given the youthful, "hippie" appearance of the Microsoft Corporation in 1978, would you have invested?
$1.25
Saturday, June 7, 2014
Vol XCIII, No. 311
Group Members
Group 3 - Case Study Analysis
Objectives
Leonelle Caliz

Adam Carswell

Selina Sanchez

Mario Caliz
Discuss Microsoft Corporation Financial Reporting Strategy

Define issues in their accounting practices

Offer recommendations

Concluding remarks
Microsoft Financial Reporting Strategy
Guess which person in this picture is
Bill Gates.
Founded in 1975 by Gates & Paul Allen.
Stable growth in stock price.
Report higher than expected financial
performance.
Microsoft Financial Strategy
Conservative approach

Two key areas where this was exercised

1 - Software Development Costs

2 - Revenue Recognition
Microsoft Reporting Strategy
Software Development Costs
FASB's guideline (SFAS NO.86)

Require capitalization once
technological feasibility is
established.
Microsoft's Policy

Expense as incurred.
Revenue Recognition
AICPA Guideline

Require that a part of software revenue be deferred when the software arrangement consists of upgrades, or other enhancements.

Microsoft's Policy

Defer revenue. (80/20 policy)
Possible motives
Microsoft's Methods
To manipulate actual income.
Smooth revenue growth.
Hide profits.


Use accountants as a competitive weapon.


Recommendations
Software Development Costs
Continue incurring costs during
research and development.

Upon technological feasibility
capitalize costs.
Revenue Recognition
Use historical data to project
future earnings.

Software updates need to be
evaluated on case to case
basis.

Recognize revenue once
upgrade is delivered.
Different organizations may use different approaches in accounting while still following the guidelines of the Generally Accepted Accounting Principles (GAAP).
Most financial statements can be manipulated making them unethical, or borderline fraudulent.
Arguably what Microsoft did was unethical, but in a system where flexibility is possible they managed to succeed without breaking the law.
Despite all of the criticism and investigation, Microsoft has still managed to remain dominant and successful in the technology industry.
15 years later and Microsoft is still dominating the technology industry.
Commercial for Microsoft Live Meeting:
Full transcript