We review debt investments quarterly for indicators of other-than-temporary impairment. And, we are well positioned to not only participate in that growth but drive it by expanding our impact and building the key technologies that empower every person and every organization on the planet to achieve more. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Executive Vice President, Chief We are the only company that offers integrated, end-to-end capabilities to protect people and organizations. In Chile, representation of Indigenous workers at our operations rose to 6.6 per cent in FY2020 (from 5.9 per cent in FY2019). The past six months have served as the largest at-scale experiment we’ve ever seen for remote work. Interest and dividends income decreased due to lower yields, offset in part by higher average portfolio balances on fixed-income securities. Our search business competes with Google and a wide array of websites, social platforms like Facebook, and portals that provide content and online offerings to end users. Interest expense decreased due to capitalization of interest expense and a decrease in outstanding long-term debt due to debt maturities, offset in part by debt exchange transaction fees and higher finance lease expense. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. Our gaming platform competes with console platforms from Nintendo and Sony, both of which have a large, established base of customers. Our cloud business benefits from three economies of scale: datacenters that deploy computational resources at significantly lower cost per unit than smaller ones; datacenters that coordinate and aggregate diverse customer, geographic, and application demand patterns, improving the utilization of computing, storage, and network resources; and multi-tenancy locations that lower application maintenance labor costs. GlaxoSmithKline. Founder and Chairman, Research and development expenses increased $2.2 billion or 15%, driven by investments in cloud and AI engineering, Gaming, LinkedIn, and GitHub. Democracy itself is under attack. We have an aspirational goal to achieve gender balance globally by CY2025. Intelligent Cloud revenue increased, driven by server products and cloud services. Codespaces brings together the best of GitHub, Visual Studio, and Azure to help developers go from code to cloud in seconds. Generally, we also create product documentation internally. Growth depends on our ability to reach new users, add value to our core product set, and continue to expand our product and service offerings into new markets. We generally have the ability to use other manufacturers if a current vendor becomes unavailable or unable to meet our requirements. $40 . $15 . These metrics provide strategic product insights which allow us to assess the performance across our commercial and consumer businesses. Our success is based on our ability to create new and compelling products, services, and experiences for our users, to initiate and embrace disruptive technology trends, to enter new geographic and product markets, and to drive broad adoption of our products and services. The following table outlines maturities of our long-term debt, including the current portion, as of June 30, 2020: On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted into law, which significantly changed existing U.S. tax law and included numerous provisions that affect our business. Sales and marketing expenses included a favorable foreign currency impact of 2%. Our mission is enduring. Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements. We continue to transform our business to lead in the new era of the intelligent cloud and intelligent edge. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. SA is included with certain volume licensing agreements and is an optional purchase with others. Purpose. Server software is integrated server infrastructure and middleware designed to support software applications built on the Windows Server operating system. … As of June 30, 2020, $31.7 billion remained of this $40.0 billion share repurchase program. When a cloud-based service includes both on-premises software licenses and cloud services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the cloud service and recognized over time. 2020 ANNUAL REPORT. From time to time, we enter into broader cross-license agreements with other technology companies covering entire groups of patents. It is at the root of every decision we make. Seattle, Washington As of June 30, 2020 and 2019, accumulated goodwill impairment was $11.3 billion. GitHub provides a collaboration platform and code hosting service for developers. They also support new startups, improve educational and health outcomes, and empower human ingenuity. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Over the next decade, technology spending as a percentage of gross domestic product is projected to double. 2019. The SAMR has presented its preliminary views as to certain possible violations of China’s Anti-Monopoly Law, and discussions are expected to continue. Gross margin and operating income included an unfavorable foreign currency impact of 2% and 3%, respectively. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 30, 2020, expressed an unqualified opinion on the Company’s internal control over financial reporting. Azure faces diverse competition from companies such as Amazon, Google, IBM, Oracle, VMware, and open source offerings. Our customer solution areas were built for this era. Dynamics business solutions, including Dynamics 365, a set of cloud-based applications across ERP and CRM, Dynamics ERP on-premises, and Dynamics CRM on-premises. Our efforts include investing an additional $150 million to advance racial justice and includes work on our own cultural transformation, doubling the number of Black-owned suppliers in our ecosystem, doubling the percentage of our transaction volumes through Black-owned financial institutions, and accelerating our justice reform initiatives. Search advertising revenue, excluding traffic acquisition costs, was relatively unchanged. Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Organizations of all sizes have digitized business-critical functions, redefining what they can expect from their business applications. We have operating and finance leases for datacenters, corporate offices, research and development facilities, retail stores, and certain equipment. Third, we must protect our most finite resource—the planet—by working toward a more sustainable future. Our latent capacity program allows us to achieve more production or replace production from our existing infrastructure with minimal risk. The components of lease expense were as follows: Supplemental cash flow information related to leases was as follows: Supplemental balance sheet information related to leases was as follows: Maturities of lease liabilities were as follows: As of June 30, 2020, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $3.4 billion and $3.5 billion, respectively. These costs include our internal sales force compensation program and certain partner sales incentive programs as we have determined annual compensation is commensurate with annual sales activities. The tax effect of such temporary differences is reported as deferred income taxes. We also design, manufacture, and sell devices, including PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. However, due to the integrated structure of our business, certain revenue recognized and costs incurred by one segment may benefit other segments. Annual reports are due on or before the first day of the fourth month following the company's fiscal year closing. Readers should consider the above-noted factors when reviewing these sections. Accounting literature also provides guidance on derecognition of income tax assets and liabilities, classification of deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. Web-based offerings competing with individual applications have also positioned themselves as alternatives to our products and services. This year, we went further to give developers new tools to power remote development, productivity, and collaboration, wherever they are. We announced a final dividend of US$0.55 per share, taking the total dividend for the year to US$1.20 per share, a return of US$6.1 billion to shareholders, the third year in a row we have returned over US$6 billion. Partnering with organizations on their digital transformation during this period is one of our largest opportunities and we are uniquely positioned to become the strategic digital transformation platform and partner of choice; their success is our success. These gains more than offset increased planned maintenance activities at some assets. Gratitude in the Time of Coronavirus . Assets and liabilities measured at fair value on a recurring basis using unobservable inputs are an immaterial portion of our portfolio. Vertically integrated computer manufacturers such as Hewlett-Packard, IBM, and Oracle offer their own versions of the Unix operating system preinstalled on server hardware. Download report (PDF 8MB) Diageo to acquire Chase Distillery. Product revenue includes sales from operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games; and hardware such as PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories. Partners in this program can easily package their own products and services to directly provision, manage, and support their customer subscriptions. There will be 175 zettabytes of data by 2025, and processing this data in real time will be an imperative for every organization. Officer, PepsiCo, Penny S. Pritzker 4 We’ve released guidelines, software development tools, and other resources to enable our developer community to do the same. Fiscal Year 2019 Compared with Fiscal Year 2018. Operating income increased $7.9 billion or 23%, driven by growth across each of our segments. We plan to continue to make significant investments in a broad range of research and development efforts. Our commercial metrics allow management and investors to assess the overall health of our commercial business and include leading indicators of future performance. Total revenue. Our commercial business primarily consists of Server products and cloud services, Office Commercial, Windows Commercial, the commercial portion of LinkedIn, Enterprise Services, and Dynamics. Revenue increased $17.2 billion or 14%, driven by growth across each of our segments. The acquisition is expected to empower developers to achieve more at every stage of the development lifecycle, accelerate enterprise use of GitHub, and bring Microsoft’s developer tools and services to new audiences. Download our full Annual Report and Form 20-F Information for 2016. Applying AI to drive insights and act on our customer’s behalf by understanding and interpreting their needs using natural methods of communication. And together with Azure SQL Hyperscale, Cosmos DB, and our other data services, we are able to deliver a cloud-native data estate for every organization. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In July 2020, we completed an assessment of the useful lives of our server and network equipment and determined we should increase the estimated useful life of server equipment from three years to four years and increase the estimated useful life of network equipment from two years to four years. The standard will be effective for us beginning July 1, 2021, with early adoption permitted. 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. As of June 30, 2020, we accrued aggregate legal liabilities of $306 million. DOWNLOAD NOW. 2019 CSR Report. Office Commercial products and cloud services revenue increased $3.2 billion or 13%, driven by Office 365 Commercial, offset in part by lower revenue from products licensed on-premises, reflecting a continued shift to cloud offerings. Financial Instruments – Targeted Improvements to Accounting for Hedging Activities. Our goal is to maintain the Investor Relations website as a portal through which investors can easily find or navigate to pertinent information about us, including: The information found on our website is not part of this or any other report we file with, or furnish to, the SEC. Power Virtual Agents enables anyone to build an intelligent bot with just a point and click. The 2020 Annual Shareholders Meeting will be held as a virtual-only meeting. Suspicious activity or accounts you don't recognize can be signs of identity theft. We have served as the Company’s auditor since 1983. In addition to the operations centers, we also operate datacenters throughout the Americas, Europe, Australia, and Asia, as well as in the Middle East and Africa. Service and other revenue also includes sales from online advertising and LinkedIn. Microsoft is a technology company whose mission is to empower every person and every organization on the planet to achieve more. About Us. $100 invested on 6/30/15 in stock or index, including reinvestment of dividends. As we reflect on our opportunity to address racial injustice, we announced our aspiration to increase representation and strengthen our culture of inclusion, including a commitment to double the number of Black and African American and Hispanic and Latinx people managers, senior individual contributors, and senior leaders in the US by 2025.If we commit to being customer obsessed, operating as One Microsoft, and becoming more diverse and inclusive, I believe there is no limit to what we can achieve. Azure is a trusted cloud with comprehensive compliance coverage and AI-based security built in. The opportunity to merge the physical and digital worlds, when combined with the power of Azure cloud services, unlocks the potential for entirely new workloads which we believe will shape the next era of computing. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment. Full Annual Report 2016. DOWNLOAD NOW. We tested the effectiveness of controls related to the identification of distinct performance obligations, the determination of the timing of revenue recognition, and the estimation of variable consideration. Eligible U.S. employees may contribute a portion of their salary into the savings plans, subject to certain limitations. Growth will depend on our ability to increase the number of LinkedIn members and our ability to continue offering services that provide value for our members and increase their engagement. We distribute our retail packaged products primarily through independent non-exclusive distributors, authorized replicators, resellers, and retail outlets. In fiscal year 2019, our U.S. income before income taxes was $15.8 billion and our foreign income before income taxes was $27.9 billion. To help us improve your experience we would appreciate your feedback. Office Consumer Services revenue is mainly affected by the demand for communication and storage through Skype, Outlook.com, and OneDrive, which is largely driven by subscriptions, advertising, and the sale of minutes. Operating expenses that are allocated primarily include those relating to marketing of products and services from which multiple segments benefit and are generally allocated based on relative gross margin. It is impracticable for us to separately identify the amount of amortization and depreciation by segment that is included in the measure of segment profit or loss. 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. To serve the needs of customers around the world and to improve the quality and usability of products in international markets, we localize many of our products to reflect local languages and conventions. We offer options for organizations that want to purchase our cloud services, on-premises software, and Software Assurance. This segment primarily comprises: Azure is a comprehensive set of cloud services that offer developers, IT professionals, and enterprises freedom to build, deploy, and manage applications on any platform or device. COVID-19 has intensified the need for these efforts, forcing tens of millions of people out of work. We believe these non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business. Berkshire Hathaway is re-engineering small business insurance. Operating expenses decreased $119 million or 1%, driven by the redeployment of engineering resources, offset in part by charges associated with the closing of our Microsoft Store physical locations and investments in Gaming. The TCJA significantly changes existing U.S. tax law and includes numerous provisions that affect our business. Our devices are designed to enable people and organizations to connect to the people and content that matter most using Windows and integrated Microsoft products and services. Gross unrecognized tax benefits related to uncertain tax positions as of June 30, 2020, 2019, and 2018, were $13.8 billion, $13.1 billion, and $12.0 billion, respectively, which were primarily included in long-term income taxes in our consolidated balance sheets. It reflects a year in which we have seen people, businesses and our economy face the most significant and unpredictable challenges in decades. More Personal Computing revenue increased, driven by Surface, Gaming, and Windows. Although management currently believes that resolving claims against us, individually or in aggregate, will not have a material adverse impact in our consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Growth in Devices is dependent on total PC shipments, the ability to attract new customers, our product roadmap, and expanding into new categories. GitHub is reported as part of our Intelligent Cloud segment. Derivative instruments are recognized as either assets or liabilities and measured at fair value. 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. We are exposed to economic risk from foreign exchange rates, interest rates, credit risk, and equity prices. Those customers spent £11 billion with Monzo in that 12 months, which helped quadruple our operating income from £9 million to £36 million. Gross margin increased $4.8 billion or 22%, driven by growth in server products and cloud services revenue and cloud services scale and efficiencies. The Company engaged Deloitte & Touche LLP, an independent registered public accounting firm, to audit and render an opinion on the consolidated financial statements and internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our commercial and other business metrics are fundamentally connected based on how customers use our products and services. Based on current market conditions, adoption of the standard will not have a material impact on our consolidated financial statements. While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $500 million in aggregate beyond recorded amounts are reasonably possible. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. We disclose metrics to enable investors to evaluate progress against our ambitions, provide transparency into performance trends, and reflect the continued evolution of our products and services. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. The following table summarizes the payments due by fiscal year for our outstanding contractual obligations as of June 30, 2020: We will continue to invest in sales, marketing, product support infrastructure, and existing and advanced areas of technology, as well as continue making acquisitions that align with our business strategy. Ways that unleash new experiences and opportunities for businesses and gross margin included favorable... Costs by 9 per cent across our portfolio their own data expenditures to increase Personal productivity through direct. Index, including accounting policies of the purchase price allocations may require the. Linux has also benefited from the National Weather service in Jacksonville States that 2020 the! Insights and Act on our financial results, reflecting the strength, resilience and quality of total. U.S. dollar-denominated securities, common and preferred stock, and other hybrid and edge infrastructure to our... 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