\n Fair Value\n Measurements
\nWe\n account for certain assets and liabilities at fair value. The\n hierarchy below lists three levels of fair value based on the\n extent to which inputs used in measuring fair value are observable\n in the market. We categorize each of our fair value\n measurements in one of these three levels based on the lowest level\n input that is significant to the fair value measurement in its\n entirety. These levels are:
\n\n
\n| \n | • | \n\n | \n Level 1 – inputs are based upon\n unadjusted quoted prices for identical instruments traded in active\n markets. Our Level 1 non-derivative investments primarily include\n U.S. government securities, domestic and international equities,\n and actively traded mutual funds. Our Level 1 derivative\n assets and liabilities include those actively traded on\n exchanges. \n | \n
\n
\n| \n | • | \n\n | \n Level 2 – inputs are based upon\n quoted prices for similar instruments in active markets, quoted\n prices for identical or similar instruments in markets that are not\n active, and model-based valuation techniques (e.g. the\n Black-Scholes model) for which all significant inputs are\n observable in the market or can be corroborated by observable\n market data for substantially the full term of the assets or\n liabilities. Where applicable, these models project future cash\n flows and discount the future amounts to a present value using\n market-based observable inputs including interest rate curves,\n credit spreads, foreign exchange rates, and forward and spot prices\n for currencies and commodities. Our Level 2 non-derivative\n investments consist primarily of corporate notes and bonds, common\n and preferred stock, mortgage- and asset-backed securities, U.S.\n government and agency securities, and foreign government bonds. Our\n Level 2 derivative assets and liabilities primarily include certain\n over-the-counter option and swap contracts. \n | \n
\n
\n| \n | • | \n\n | \n Level 3 – inputs are generally\n unobservable and typically reflect management’s estimates of\n assumptions that market participants would use in pricing the asset\n or liability. The fair values are therefore determined using\n model-based techniques, including option pricing models and\n discounted cash flow models. Our Level 3 non-derivative assets\n primarily comprise investments in common and preferred stock and\n goodwill when it is recorded at fair value due to an impairment\n charge. Unobservable inputs used in the models are significant\n to the fair values of the assets and liabilities. Our Level 3\n derivative assets and liabilities primarily include equity\n derivatives. \n | \n
We\n measure certain assets, including our cost and equity method\n investments, at fair value on a nonrecurring basis when they are\n deemed to be other-than-temporarily impaired. The fair values of\n these investments are determined based on valuation techniques\n using the best information available, and may include quoted market\n prices, market comparables, and discounted cash flow projections.\n An impairment charge is recorded when the cost of the investment\n exceeds its fair value and this condition is determined to be\n other-than-temporary.
\nOur other\n current financial assets and our current financial liabilities have\n fair values that approximate their carrying values.
\n\n The items accounting for\n the difference between income taxes computed at the U.S. federal\n statutory rate and our effective rate were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Federal statutory rate \n | \n \n | \n | 35.0% | \n\n | \n | \n | 35.0% | \n\n | \n | \n | 35.0% | \n\n |
| \n Effect of: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Foreign earnings taxed at lower\n rates \n | \n \n | \n | (20.9)% | \n\n | \n | \n | (17.1)% | \n\n | \n | \n | (17.5)% | \n\n |
| \n Phone Hardware nondeductible charges\n and valuation allowance \n | \n \n | \n | 19.1% | \n\n | \n | \n | 0.9% | \n\n | \n | \n | 0% | \n\n |
| \n Domestic production activities\n deduction \n | \n \n | \n | (2.4)% | \n\n | \n | \n | (1.0)% | \n\n | \n | \n | (1.2)% | \n\n |
| \n Other reconciling items,\n net \n | \n \n | \n | 3.3% | \n\n | \n | \n | 2.9% | \n\n | \n | \n | 2.9% | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Effective rate \n | \n \n | \n | 34.1% | \n\n | \n | \n | 20.7% | \n\n | \n | \n | 19.2% | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n
\n NOTE 11 —\n INTANGIBLE ASSETS
\n \n\n The components of\n intangible assets, all of which are finite-lived, were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Gross \n Carrying \n Amount | \n \n | \n | Accumulated \n Amortization | \n \n | \n | Net Carrying \n Amount | \n \n | \n | Gross \n Carrying \n Amount | \n \n | \n | Accumulated \n Amortization | \n \n | \n | Net Carrying \n Amount | \n \n | ||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| Year Ended June 30, | \n\n | \n | \n | \n | \n | \n | \n | 2015 | \n\n | \n | \n | \n | \n | \n | \n | \n | 2014 | \n\n | ||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Technology-based (a) \n | \n \n | $ | \n6,187 | \n\n | \n | $ | \n(3,410 | \n) | \n\n | $ | \n2,777 | \n\n | \n | $ | \n6,440 | \n\n | \n | $ | \n(2,615 | \n) | \n\n | $ | \n3,825 | \n\n |
| \n Marketing-related \n | \n \n | \n | 1,974 | \n\n | \n | \n | (540 | \n) | \n\n | \n | 1,434 | \n\n | \n | \n | 1,518 | \n\n | \n | \n | (324 | \n) | \n\n | \n | 1,194 | \n\n |
| \n Contract-based \n | \n \n | \n | 1,344 | \n\n | \n | \n | (862 | \n) | \n\n | \n | 482 | \n\n | \n | \n | 2,266 | \n\n | \n | \n | (716 | \n) | \n\n | \n | 1,550 | \n\n |
| \n Customer-related \n | \n \n | \n | 632 | \n\n | \n | \n | (490 | \n) | \n\n | \n | 142 | \n\n | \n | \n | 732 | \n\n | \n | \n | (320 | \n) | \n\n | \n | 412 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n10,137 | \n\n | \n | $ | \n(5,302 | \n) | \n\n | $ | \n4,835 | \n\n | \n | $ | \n10,956 | \n\n | \n | $ | \n(3,975 | \n) | \n\n | $ | \n6,981 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Technology-based intangible assets included $116 million and\n $98 million as of June 30, 2015 and 2014, respectively, of net\n carrying amount of software to be sold, leased, or otherwise\n marketed. \n | \n
\n We estimate that we have\n no significant residual value related to our intangible assets.\n During fiscal year 2015, we recorded impairment charges of $2.2\n billion related to our Phone Hardware intangible assets. In the\n fourth quarter of fiscal year 2015, we tested the intangible assets\n for recoverability due to changes in facts and circumstances\n associated with the shift in strategic direction and reduced\n profitability expectations for Phone Hardware. Based on the results\n of our testing, we determined that the carrying value of the\n intangible assets was not recoverable, and an impairment charge was\n recorded to the extent that estimated fair value exceeded carrying\n value. We primarily used a relief from royalty income approach to\n determine the fair value of the intangible assets and determine the\n amount of impairment. These intangible assets impairment charges\n were included in impairment, integration, and restructuring\n expenses in our consolidated income statement, and reflected in\n Corporate and Other in our table of operating income (loss) by\n segment group in Note 22 – Segment Information and Geographic\n Data. No material impairments of intangible assets were identified\n during fiscal year 2014.
\n\n
\n\n The components of\n intangible assets acquired during the periods presented were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Amount | \n\n | \n | \n \n Weighted \n\n Average Life \n | \n \n | \n | Amount | \n\n | \n | \n \n Weighted \n\n Average Life \n | \n \n | ||||
| \n | \n \n | \n |||||||||||||||
| \n | \n | \n | \n | \n | ||||||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | \n | \n | \n | 2014 | \n\n | \n | \n | \n | ||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n Technology-based \n | \n \n | $ | \n874 | \n\n | \n | \n | 5 years | \n\n | \n | $ | \n2,841 | \n\n | \n | \n | 9 years | \n\n |
| \n Marketing-related \n | \n \n | \n | 543 | \n\n | \n | \n | 8 years | \n\n | \n | \n | 174 | \n\n | \n | \n | 2 years | \n\n |
| \n Contract-based \n | \n \n | \n | 0 | \n\n | \n | \n | \n | \n | \n | \n | 1,500 | \n\n | \n | \n | 9 years | \n\n |
| \n Customer-related \n | \n \n | \n | 37 | \n\n | \n | \n | 4 years | \n\n | \n | \n | 363 | \n\n | \n | \n | 3 years | \n\n |
| \n | \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | |||
| \n Total \n | \n \n | $ | \n1,454 | \n\n | \n | \n | 6 years | \n\n | \n | $ | \n4,878 | \n\n | \n | \n | 8 years | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n |
\n The table above includes\n $4.5 billion related to the acquisition of NDS during fiscal year\n 2014, of which $2.2 billion was impaired in fiscal year 2015. See\n Note 9 – Business Combination for additional\n details.
\n\n Intangible assets\n amortization expense was $1.3 billion, $845 million, and $739\n million for fiscal years 2015, 2014, and 2013, respectively.\n Amortization of capitalized software was $79 million, $200 million,\n and $210 million for fiscal years 2015, 2014, and 2013,\n respectively.
\n\n The following table\n outlines the estimated future amortization expense related to\n intangible assets held at June 30, 2015:
\n\n
\n| \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | |
| \n | \n \n | \n |||
| \n | \n | |||
| \n Year Ending\n June 30, \n | \n \n | \n | \n | \n |
| \n | \n | |||
| \n 2016 \n | \n \n | $ | \n910 | \n\n |
| \n 2017 \n | \n \n | \n | 755 | \n\n |
| \n 2018 \n | \n \n | \n | 670 | \n\n |
| \n 2019 \n | \n \n | \n | 554 | \n\n |
| \n 2020 \n | \n \n | \n | 495 | \n\n |
| \n Thereafter \n | \n \n | \n | 1,451 | \n\n |
| \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n4,835 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n
\n
\nResearch and\n Development
\n\n Research and development\n expenses include payroll, employee benefits, stock-based\n compensation expense, and other headcount-related expenses\n associated with product development. Research and development\n expenses also include third-party development and programming\n costs, localization costs incurred to translate software for\n international markets, and the amortization of purchased software\n code and services content. Such costs related to software\n development are included in research and development expense until\n the point that technological feasibility is reached, which for our\n software products, is generally shortly before the products are\n released to manufacturing. Once technological feasibility is\n reached, such costs are capitalized and amortized to cost of\n revenue over the estimated lives of the products.
\n\n The following table\n presents the fair values of derivative instruments designated as\n hedging instruments (“designated hedge derivatives”)\n and not designated as hedging instruments (“non-designated\n hedge derivatives”). The fair values exclude the impact of\n netting derivative assets and liabilities when a legally\n enforceable master netting agreement exists and fair value\n adjustments related to our own credit risk and counterparty credit\n risk:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | June 30,\n 2015 \n | \n \n | \n | June 30,\n 2014 \n | \n \n | ||||||||||||||||||||||||||
| \n | \n | Assets \n | \n \n | \n | Liabilities \n | \n \n | \n | Assets \n | \n \n | \n | Liabilities \n | \n \n | ||||||||||||||||||||
| (In millions) | \n\n | Short-term \n Investments | \n \n | \n | Other \n Current \n Assets | \n \n | \n | Equity and \n Other \n Investments | \n \n | \n | Other \n Current \n Liabilities | \n \n | \n | Short-term \n Investments | \n \n | \n | Other \n Current \n Assets | \n \n | \n | Equity and \n Other \n Investments | \n \n | \n | Other \n Current \n Liabilities | \n \n | ||||||||
| \n | \n \n | \n |||||||||||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||||
| \n Non-designated Hedge\n Derivatives \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||||
| \n Foreign exchange contracts \n | \n \n | $ | \n17 | \n\n | \n | $ | \n167 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(79 | \n) | \n\n | $ | \n10 | \n\n | \n | $ | \n39 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(97 | \n) | \n
| \n Equity contracts \n | \n \n | \n | 148 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (18 | \n) | \n\n | \n | 177 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (21 | \n) | \n
| \n Interest rate contracts \n | \n \n | \n | 7 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (12 | \n) | \n\n | \n | 17 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (12 | \n) | \n
| \n Credit contracts \n | \n \n | \n | 16 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (9 | \n) | \n\n | \n | 24 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (13 | \n) | \n
| \n Commodity contracts \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 15 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (1 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n188 | \n\n | \n | $ | \n167 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(118 | \n) | \n\n | $ | \n243 | \n\n | \n | $ | \n39 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(144 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||||
| \n Designated Hedge\n Derivatives \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||||
| \n Foreign exchange contracts \n | \n \n | $ | \n56 | \n\n | \n | $ | \n552 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(31 | \n) | \n\n | $ | \n1 | \n\n | \n | $ | \n70 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(15 | \n) | \n
| \n Equity contracts \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 25 | \n\n | \n | \n | (69 | \n) | \n\n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 7 | \n\n | \n | \n | (125 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n56 | \n\n | \n | $ | \n552 | \n\n | \n | $ | \n25 | \n\n | \n | $ | \n(100 | \n) | \n\n | $ | \n1 | \n\n | \n | $ | \n70 | \n\n | \n | $ | \n7 | \n\n | \n | $ | \n(140 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total gross amounts of\n derivatives \n | \n \n | $ | \n244 | \n\n | \n | $ | \n719 | \n\n | \n | $ | \n25 | \n\n | \n | $ | \n(218 | \n) | \n\n | $ | \n244 | \n\n | \n | $ | \n109 | \n\n | \n | $ | \n7 | \n\n | \n | $ | \n(284 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n Gross derivatives either offset or\n subject to an enforceable master netting agreement \n | \n \n | $ | \n126 | \n\n | \n | $ | \n719 | \n\n | \n | $ | \n25 | \n\n | \n | $ | \n(218 | \n) | \n\n | $ | \n99 | \n\n | \n | $ | \n109 | \n\n | \n | $ | \n7 | \n\n | \n | $ | \n(284 | \n) | \n
| \n Gross amounts of derivatives offset\n in the balance sheet \n | \n \n | \n | (66 | \n) | \n\n | \n | (71 | \n) | \n\n | \n | (25 | \n) | \n\n | \n | 161 | \n\n | \n | \n | (77 | \n) | \n\n | \n | (71 | \n) | \n\n | \n | (7 | \n) | \n\n | \n | 155 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net amounts presented in the balance\n sheet \n | \n \n | \n | 60 | \n\n | \n | \n | 648 | \n\n | \n | \n | 0 | \n\n | \n | \n | (57 | \n) | \n\n | \n | 22 | \n\n | \n | \n | 38 | \n\n | \n | \n | 0 | \n\n | \n | \n | (129 | \n) | \n
| \n Gross amounts of derivatives not\n offset in the balance sheet \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Cash collateral received \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (456 | \n) | \n\n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net amount \n | \n \n | $ | \n60 | \n\n | \n | $ | \n648 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(513 | \n) | \n\n | $ | \n22 | \n\n | \n | $ | \n38 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(129 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n NOTE 8 —\n PROPERTY AND EQUIPMENT
\n\n The components of\n property and equipment were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||||||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Land \n | \n \n | $ | \n769 | \n\n | \n | $ | \n541 | \n\n |
| \n Buildings and improvements \n | \n \n | \n | 10,800 | \n\n | \n | \n | 8,867 | \n\n |
| \n Leasehold improvements \n | \n \n | \n | 3,577 | \n\n | \n | \n | 3,560 | \n\n |
| \n Computer equipment and\n software \n | \n \n | \n | 13,612 | \n\n | \n | \n | 11,430 | \n\n |
| \n Furniture and equipment \n | \n \n | \n | 3,579 | \n\n | \n | \n | 3,406 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total, at cost \n | \n \n | \n | 32,337 | \n\n | \n | \n | 27,804 | \n\n |
| \n Accumulated depreciation \n | \n \n | \n | (17,606 | \n) | \n\n | \n | (14,793 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total, net \n | \n \n | $ | \n14,731 | \n\n | \n | $ | \n13,011 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n During fiscal years 2015,\n 2014, and 2013, depreciation expense was $4.1 billion, $3.4\n billion, and $2.6 billion, respectively.
\nAllowance for Doubtful\n Accounts
\n\n The allowance for\n doubtful accounts reflects our best estimate of probable losses\n inherent in the accounts receivable balance. We determine the\n allowance based on known troubled accounts, historical experience,\n and other currently available evidence. Activity in the allowance\n for doubtful accounts was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Balance, beginning of\n period \n | \n \n | $ | \n301 | \n\n | \n | $ | \n336 | \n\n | \n | $ | \n389 | \n\n |
| \n Charged to costs and other \n | \n \n | \n | 77 | \n\n | \n | \n | 16 | \n\n | \n | \n | 4 | \n\n |
| \n Write-offs \n | \n \n | \n | (43 | \n) | \n\n | \n | (51 | \n) | \n\n | \n | (57 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Balance, end of period \n | \n \n | $ | \n335 | \n\n | \n | $ | \n301 | \n\n | \n | $ | \n336 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n The components of basic\n and diluted EPS were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions, except earnings per share) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Net income available for common\n shareholders (A) \n | \n \n | $ | \n12,193 | \n\n | \n | $ | \n22,074 | \n\n | \n | $ | \n21,863 | \n\n |
| \n Weighted average outstanding shares\n of common stock (B) \n | \n \n | \n | 8,177 | \n\n | \n | \n | 8,299 | \n\n | \n | \n | 8,375 | \n\n |
| \n Dilutive effect of stock-based\n awards \n | \n \n | \n | 77 | \n\n | \n | \n | 100 | \n\n | \n | \n | 95 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Common stock and common stock\n equivalents (C) \n | \n \n | \n | 8,254 | \n\n | \n | \n | 8,399 | \n\n | \n | \n | 8,470 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | |||||||||
| \n Earnings Per Share \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Basic (A/B) \n | \n \n | $ | \n1.49 | \n\n | \n | $ | \n2.66 | \n\n | \n | $ | \n2.61 | \n\n |
| \n Diluted (A/C) \n | \n \n | $ | \n1.48 | \n\n | \n | $ | \n2.63 | \n\n | \n | $ | \n2.58 | \n\n |
| \n | \n \n | \n
\n NOTE 9 — BUSINESS\n COMBINATIONS
\n \nMojang Synergies AB
\n\n On November 6, 2014, we acquired\n Mojang Synergies AB (“Mojang”), the Swedish video game\n developer of the Minecraft gaming franchise, for $2.5 billion in\n cash, net of cash acquired. The addition of Minecraft and its\n community enhances our gaming portfolio across Windows, Xbox, and\n other ecosystems besides our own. Our purchase price allocation is\n preliminary and subject to revision as more detailed analyses are\n completed and additional information about fair value of assets and\n liabilities becomes available, including additional information\n relating to tax matters and finalization of our valuation of\n identified intangible assets.
\n\n The significant classes of assets and\n liabilities to which we preliminarily allocated the purchase price\n were goodwill of $1.8 billion and identifiable intangible assets of\n $928 million, primarily marketing-related (trade names). The\n goodwill recognized in connection with the acquisition is primarily\n attributable to anticipated synergies from future growth, and is\n not expected to be deductible for tax purposes. We assigned the\n goodwill to our Devices and Consumer (“D&C”) Other\n segment. Identifiable intangible assets were assigned a total\n weighted-average amortization period of 6.3 years. Mojang has been\n included in our consolidated results of operations since the\n acquisition date.
\nNokia’s Devices and Services\n Business
\n\n On April 25, 2014, we acquired\n substantially all of Nokia Corporation’s\n (“Nokia”) Devices and Services business\n (“NDS”) for a total purchase price of $9.4 billion,\n including cash acquired of $1.5 billion (the\n “Acquisition”). The purchase price consisted primarily\n of cash of $7.1 billion and Nokia’s repurchase of convertible\n notes of $2.1 billion, which was a non-cash transaction, and\n liabilities assumed of $0.2 billion. The Acquisition was expected\n to accelerate the growth of our D&C business through faster\n innovation, synergies, and unified branding and\n marketing.
\n\n The allocation of the purchase price\n to goodwill was completed as of March 31, 2015. The major\n classes of assets and liabilities to which we have allocated the\n purchase price were as follows:
\n\n
\n \n| \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||
| \n | \n \n | \n |||
| \n | \n | |||
| \n Cash \n | \n \n | $ | \n1,506 | \n\n |
| \n Accounts\n receivable (a) \n | \n \n | \n | 754 | \n\n |
| \n Inventories \n | \n \n | \n | 544 | \n\n |
| \n Other current assets \n | \n \n | \n | 936 | \n\n |
| \n Property and equipment \n | \n \n | \n | 981 | \n\n |
| \n Intangible assets \n | \n \n | \n | 4,509 | \n\n |
| \n Goodwill (b) \n | \n \n | \n | 5,456 | \n\n |
| \n Other \n | \n \n | \n | 221 | \n\n |
| \n Current liabilities \n | \n \n | \n | (4,575 | \n) | \n
| \n Long-term liabilities \n | \n \n | \n | (890 | \n) | \n
| \n | \n \n | \n |||
| \n Total purchase price \n | \n \n | $ | \n9,442 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n
\n
\n \n| (a) | \n\n Gross accounts receivable was $901 million, of which $147\n million was expected to be uncollectible. \n | \n
| (b) | \n\n Goodwill was assigned to our Phone Hardware segment. The\n goodwill was primarily attributed to increased synergies that were\n expected to be achieved from the integration of NDS. \n | \n
\n
\n\n Following are the details of the\n purchase price allocated to the intangible assets\n acquired:
\n\n
\n \n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Amount | \n\n | \n | \n \n Weighted \n\n Average Life \n | \n \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| \n Technology-based \n | \n \n | $ | \n2,493 | \n\n | \n | \n | 9 years | \n\n |
| \n Contract-based \n | \n \n | \n | 1,500 | \n\n | \n | \n | 9 years | \n\n |
| \n Customer-related \n | \n \n | \n | 359 | \n\n | \n | \n | 3 years | \n\n |
| \n Marketing-related (trade\n names) \n | \n \n | \n | 157 | \n\n | \n | \n | 2 years | \n\n |
| \n | \n \n | \n \n | \n | \n | \n | |||
| \n Fair value of intangible assets\n acquired \n | \n \n | $ | \n4,509 | \n\n | \n | \n | 8 years | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n |
\n During the fourth quarter of fiscal\n year 2015, we recorded $7.5 billion of goodwill and asset\n impairment charges related to our Phone Hardware business. These\n costs are included in impairment, integration, and restructuring\n expenses in our consolidated income statement. See Note 10 –\n Goodwill and Note 11 – Intangible Assets for additional\n details.
\n\n Our consolidated income statement for\n fiscal year 2014 included revenue and operating loss of $2.0\n billion and $692 million, respectively, attributable to NDS since\n the Acquisition.
\n\n Following are the supplemental\n consolidated results of Microsoft Corporation on an unaudited pro\n forma basis, as if the Acquisition had been consummated on\n July 1, 2012:
\n\n
\n \n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions, except per share amounts) | \n\n | \n | \n | \n | \n | \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| Year Ended June 30, | \n\n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | \n | ||||||
| \n Revenue \n | \n \n | $ | \n96,248 | \n\n | \n | $ | \n93,243 | \n\n |
| \n Net income \n | \n \n | $ | \n20,234 | \n\n | \n | $ | \n20,153 | \n\n |
| \n Diluted earnings per share \n | \n \n | $ | \n2.41 | \n\n | \n | $ | \n2.38 | \n\n |
| \n | \n \n | \n
\n These pro forma results were based on\n estimates and assumptions, which we believe are reasonable. They\n are not the results that would have been realized had we been a\n combined company during the periods presented and are not\n necessarily indicative of our consolidated results of operations in\n future periods. The pro forma results include adjustments primarily\n related to purchase accounting adjustments and the elimination of\n related party transactions between Microsoft and NDS. Acquisition\n costs and other nonrecurring charges incurred are included in the\n earliest period presented.
\n\n During the fourth quarter of fiscal\n year 2014, we incurred $21 million of acquisition costs associated\n with the purchase of NDS. Acquisition costs are primarily comprised\n of transaction fees and direct acquisition costs, including legal,\n finance, consulting, and other professional fees. These costs are\n included in impairment, integration, and restructuring expenses on\n our consolidated income statement for fiscal year\n 2014.
\n\n Certain concurrent transactions were\n recognized separately from the Acquisition. Prior to the\n Acquisition, we had joint strategic initiatives with Nokia; this\n contractual relationship was terminated in conjunction with the\n Acquisition. No gain or loss was recorded upon termination of this\n agreement, as it was determined to be at market value. In addition,\n we agreed to license Nokia’s mapping services and will pay\n Nokia separately for the services provided under a four-year\n license as they are rendered.
\nYammer
\n\n On July 18, 2012, we acquired\n Yammer, Inc. (“Yammer”), a leading provider of\n enterprise social networks, for $1.1 billion in cash. Yammer added\n an enterprise social networking service to Microsoft’s\n portfolio of complementary cloud-based services. The major classes\n of assets to which we allocated the purchase price were goodwill of\n $937 million and identifiable intangible assets of $178 million. We\n assigned the goodwill to Commercial Other under our current segment\n structure. Yammer was consolidated into our results of operations\n starting on the acquisition date.
\n\n
\nOther
\n\n During fiscal year 2015, we completed\n 15 additional acquisitions for total cash consideration of $892\n million. These entities have been included in our consolidated\n results of operations since their respective acquisition\n dates.
\n\n Pro forma results of operations for\n Mojang and our other acquisitions during the current period have\n not been presented because the effects of these business\n combinations, individually and in aggregate, were not material to\n our consolidated results of operations.
\n\n NOTE 7 —\n INVENTORIES
\n\n The components of\n inventories were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||||||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Raw materials \n | \n \n | $ | \n1,100 | \n\n | \n | $ | \n944 | \n\n |
| \n Work in process \n | \n \n | \n | 202 | \n\n | \n | \n | 266 | \n\n |
| \n Finished goods \n | \n \n | \n | 1,600 | \n\n | \n | \n | 1,450 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n2,902 | \n\n | \n | $ | \n2,660 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Stock-Based\n Compensation
\n\n We measure stock-based\n compensation cost at the grant date based on the fair value of the\n award and recognize it as expense, net of estimated forfeitures,\n over the vesting or service period, as applicable, of the stock\n award (generally four to five years) using the straight-line\n method.
\n\n NOTE 12 —\n DEBT
\nShort-term Debt
\n\n As of June 30, 2015,\n we had $5.0 billion of commercial paper issued and outstanding,\n with a weighted-average interest rate of 0.11% and maturities\n ranging from 8 days to 63 days. As of June 30, 2014, we had\n $2.0 billion of commercial paper issued and outstanding, with a\n weighted-average interest rate of 0.12% and maturities ranging from\n 86 to 91 days. The estimated fair value of this commercial paper\n approximates its carrying value.
\n\n We have two $5.0 billion\n credit facilities that expire on November 4, 2015 and\n November 14, 2018, respectively. These credit facilities serve\n as a back-up for our commercial paper program. As of June 30,\n 2015, we were in compliance with the only financial covenant in\n both credit agreements, which requires us to maintain a coverage\n ratio of at least three times earnings before interest, taxes,\n depreciation, and amortization to interest expense, as defined in\n the credit agreements. No amounts were drawn against these credit\n facilities during any of the periods presented.
\nLong-term Debt
\n\n As of June 30, 2015,\n the total carrying value and estimated fair value of our long-term\n debt, including the current portion, were $30.3 billion and $30.5\n billion, respectively. This is compared to a carrying value and\n estimated fair value of our long-term debt of $20.6 billion and\n $21.5 billion, respectively, as of June 30, 2014. These\n estimated fair values are based on Level 2 inputs.
\n\n
\n\n The components of our\n long-term debt, including the current portion, and the associated\n interest rates were as follows as of June 30, 2015 and\n 2014:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Due Date | \n\n | \n \n Face Value \n\n June 30, | \n \n | \n | \n \n Face Value \n\n June 30, | \n \n | \n | \n \n Stated \n Rate \n | \n \n | \n | \n \n Effective \n Rate \n | \n \n | ||||
| \n | \n \n | \n |||||||||||||||
| \n | \n | (In millions) | \n\n | \n | \n | \n | \n | \n | \n | |||||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n Notes \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n September 25, 2015 \n | \n \n | $ | \n1,750 | \n\n | \n | $ | \n1,750 | \n\n | \n | \n | 1.625% | \n\n | \n | \n | 1.795% | \n\n |
| \n February 8, 2016 \n | \n \n | \n | 750 | \n\n | \n | \n | 750 | \n\n | \n | \n | 2.500% | \n\n | \n | \n | 2.642% | \n\n |
| \n November 15, 2017 \n | \n \n | \n | 600 | \n\n | \n | \n | 600 | \n\n | \n | \n | 0.875% | \n\n | \n | \n | 1.084% | \n\n |
| \n May 1, 2018 \n | \n \n | \n | 450 | \n\n | \n | \n | 450 | \n\n | \n | \n | 1.000% | \n\n | \n | \n | 1.106% | \n\n |
| \n December 6, 2018 \n | \n \n | \n | 1,250 | \n\n | \n | \n | 1,250 | \n\n | \n | \n | 1.625% | \n\n | \n | \n | 1.824% | \n\n |
| \n June 1, 2019 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 4.200% | \n\n | \n | \n | 4.379% | \n\n |
| \n February 12,\n 2020 (a) \n | \n \n | \n | 1,500 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1.850% | \n\n | \n | \n | 1.935% | \n\n |
| \n October 1, 2020 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 3.000% | \n\n | \n | \n | 3.137% | \n\n |
| \n February 8, 2021 \n | \n \n | \n | 500 | \n\n | \n | \n | 500 | \n\n | \n | \n | 4.000% | \n\n | \n | \n | 4.082% | \n\n |
| \n December 6,\n 2021 (b) \n | \n \n | \n | 1,950 | \n\n | \n | \n | 2,396 | \n\n | \n | \n | 2.125% | \n\n | \n | \n | 2.233% | \n\n |
| \n February 12,\n 2022 (a) \n | \n \n | \n | 1,500 | \n\n | \n | \n | 0 | \n\n | \n | \n | 2.375% | \n\n | \n | \n | 2.466% | \n\n |
| \n November 15, 2022 \n | \n \n | \n | 750 | \n\n | \n | \n | 750 | \n\n | \n | \n | 2.125% | \n\n | \n | \n | 2.239% | \n\n |
| \n May 1, 2023 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 2.375% | \n\n | \n | \n | 2.465% | \n\n |
| \n December 15, 2023 \n | \n \n | \n | 1,500 | \n\n | \n | \n | 1,500 | \n\n | \n | \n | 3.625% | \n\n | \n | \n | 3.726% | \n\n |
| \n February 12,\n 2025 (a) \n | \n \n | \n | 2,250 | \n\n | \n | \n | 0 | \n\n | \n | \n | 2.700% | \n\n | \n | \n | 2.772% | \n\n |
| \n December 6,\n 2028 (b) \n | \n \n | \n | 1,950 | \n\n | \n | \n | 2,396 | \n\n | \n | \n | 3.125% | \n\n | \n | \n | 3.218% | \n\n |
| \n May 2,\n 2033 (b) \n | \n \n | \n | 613 | \n\n | \n | \n | 753 | \n\n | \n | \n | 2.625% | \n\n | \n | \n | 2.690% | \n\n |
| \n February 12,\n 2035 (a) \n | \n \n | \n | 1,500 | \n\n | \n | \n | 0 | \n\n | \n | \n | 3.500% | \n\n | \n | \n | 3.604% | \n\n |
| \n June 1, 2039 \n | \n \n | \n | 750 | \n\n | \n | \n | 750 | \n\n | \n | \n | 5.200% | \n\n | \n | \n | 5.240% | \n\n |
| \n October 1, 2040 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 4.500% | \n\n | \n | \n | 4.567% | \n\n |
| \n February 8, 2041 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 5.300% | \n\n | \n | \n | 5.361% | \n\n |
| \n November 15, 2042 \n | \n \n | \n | 900 | \n\n | \n | \n | 900 | \n\n | \n | \n | 3.500% | \n\n | \n | \n | 3.571% | \n\n |
| \n May 1, 2043 \n | \n \n | \n | 500 | \n\n | \n | \n | 500 | \n\n | \n | \n | 3.750% | \n\n | \n | \n | 3.829% | \n\n |
| \n December 15, 2043 \n | \n \n | \n | 500 | \n\n | \n | \n | 500 | \n\n | \n | \n | 4.875% | \n\n | \n | \n | 4.918% | \n\n |
| \n February 12,\n 2045 (a) \n | \n \n | \n | 1,750 | \n\n | \n | \n | 0 | \n\n | \n | \n | 3.750% | \n\n | \n | \n | 3.800% | \n\n |
| \n February 12,\n 2055 (a) \n | \n \n | \n | 2,250 | \n\n | \n | \n | 0 | \n\n | \n | \n | 4.000% | \n\n | \n | \n | 4.063% | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n Total \n | \n \n | $ | \n30,463 | \n\n | \n | $ | \n20,745 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
\n
\n| (a) | \n\n In\n February 2015, we issued $10.8 billion of debt\n securities. \n | \n
| (b) | \n\n Euro-denominated debt securities. \n | \n
\n The notes in the table\n above are senior unsecured obligations and rank equally with our\n other senior unsecured debt outstanding. Interest on these notes is\n paid semi-annually, except for the euro-denominated debt securities\n on which interest is paid annually. Cash paid for interest on our\n debt for fiscal years 2015, 2014, and 2013 was $620 million, $509\n million, and $371 million, respectively. As of June 30, 2015\n and 2014, the aggregate unamortized discount for our long-term\n debt, including the current portion, was $156 million and $100\n million, respectively.
\n\n
\nDebt Service
\n\n Maturities of our\n long-term debt for each of the next five years and thereafter are\n as follows:
\n\n
\n| \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | |
| \n | \n \n | \n |||
| \n | \n | |||
| \n Year Ending\n June 30, \n | \n \n | \n | \n | \n |
| \n | \n | |||
| \n 2016 \n | \n \n | $ | \n2,500 | \n\n |
| \n 2017 \n | \n \n | \n | 0 | \n\n |
| \n 2018 \n | \n \n | \n | 1,050 | \n\n |
| \n 2019 \n | \n \n | \n | 2.250 | \n\n |
| \n 2020 \n | \n \n | \n | 1,500 | \n\n |
| \n Thereafter \n | \n \n | \n | 23,163 | \n\n |
| \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n30,463 | \n\n |
| \n | \n | \n | \n \n | \n
Cost of Revenue
\n\n Cost of revenue includes:\n manufacturing and distribution costs for products sold and programs\n licensed; operating costs related to product support service\n centers and product distribution centers; costs incurred to include\n software on PCs sold by OEMs, to drive traffic to our websites, and\n to acquire online advertising space; costs incurred to support and\n maintain Internet-based products and services, including datacenter\n costs and royalties; warranty costs; inventory valuation\n adjustments; costs associated with the delivery of consulting\n services; and the amortization of capitalized software development\n costs. Capitalized software development costs are amortized over\n the estimated lives of the products.
\n\n NOTE 22 —\n SEGMENT INFORMATION AND GEOGRAPHIC DATA
\n \n\n In its operation of the\n business, management, including our chief operating decision maker,\n the company’s Chief Executive Officer, reviews certain\n financial information, including segmented internal profit and loss\n statements prepared on a basis not consistent with U.S. GAAP. The\n segment information in this note is reported on that basis. During\n the periods presented, we reported our financial performance based\n on the following segments; D&C Licensing, Computing and Gaming\n Hardware, Phone Hardware, D&C Other, Commercial Licensing, and\n Commercial Other.
\n\n On April 25, 2014,\n we acquired substantially all of NDS. See Note 9 – Business\n Combinations for additional details. NDS has been included in our\n consolidated results of operations since the acquisition date. We\n report the financial performance of the acquired business in our\n Phone Hardware segment. Prior to the acquisition of NDS, financial\n results associated with our joint strategic initiatives with Nokia\n were reflected in our D&C Licensing segment. The contractual\n relationship with Nokia related to those initiatives ended in\n conjunction with the acquisition.
\n\n Our reportable segments\n are described below.
\nDevices and\n Consumer
\n\n Our D&C segments\n develop, manufacture, market, and support products and services\n designed to entertain and connect people, increase personal\n productivity, help people simplify tasks and make more informed\n decisions online, and help advertisers connect with audiences. Our\n D&C segments are:
\n\n
\n| \n | • | \n\n | \n D&C Licensing, comprising: Windows, including all\n OEM licensing (“Windows OEM”) and other non-volume\n licensing and academic volume licensing of the Windows operating\n system and related software; non-volume licensing of Microsoft\n Office, comprising the core Office product set, for consumers\n (“Office Consumer”); Windows Phone operating system,\n including related patent licensing; and certain other patent\n licensing revenue. \n | \n
\n
\n| \n | • | \n\n | \n Computing and Gaming Hardware, comprising: Xbox gaming\n and entertainment consoles and accessories, second-party and\n third-party video game royalties, and Xbox Live subscriptions\n (“Xbox Platform”); Surface devices and accessories\n (“Surface”); and Microsoft PC accessories. \n | \n
\n
\n| \n | • | \n\n | \n Phone Hardware, comprising: Lumia phones and other\n non-Lumia phones, beginning with our acquisition of NDS. \n | \n
\n
\n| \n | • | \n\n | \n D&C Other, comprising: Resale, consisting of\n transactions in our Windows Store and Xbox marketplace; search\n advertising; display advertising; Office 365 Consumer, comprising\n Office 365 Home and Office 365 Personal; Studios, comprising\n first-party video games; Mojang; non-Microsoft products sold in our\n retail stores; and certain other consumer products and services not\n included in the categories above. \n | \n
Commercial
\n\n Our Commercial segments\n develop, market, and support software and services designed to\n increase individual, team, and organizational productivity and\n efficiency, including simplifying everyday tasks through seamless\n operations across the user’s hardware and software. Our\n Commercial segments are:
\n\n
\n| \n | • | \n\n | \n Commercial Licensing, comprising: server products,\n including Windows Server, Microsoft SQL Server, Visual Studio,\n System Center, and related Client Access Licenses\n (“CALs”); Windows Embedded; volume licensing of the\n Windows operating system, excluding academic (“Windows\n Commercial”); Microsoft Office for business, including\n Office, Exchange, SharePoint, Skype for Business, and related CALs\n (“Office Commercial”); Microsoft Dynamics business\n solutions, excluding Dynamics CRM Online; and Skype. \n | \n
\n
\n| \n | • | \n\n | \n Commercial Other, comprising: Enterprise Services,\n including Premier Support Services and Microsoft Consulting\n Services; Commercial Cloud, comprising Office 365 Commercial, other\n Microsoft Office online offerings, Dynamics CRM Online, and\n Microsoft Azure; and certain other commercial products and online\n services not included in the categories above. \n | \n
\n Revenue and cost of\n revenue are generally directly attributed to our segments. Certain\n revenue contracts are allocated among the segments based on the\n relative value of the underlying products and services, which can\n include allocation based on actual prices charged, prices when sold\n separately, or estimated costs plus a profit margin. Cost of\n revenue is directly charged to our hardware segments. For the\n remaining segments, cost of revenue is directly charged in most\n cases and allocated in certain cases, generally using a relative\n revenue methodology.
\n\n We do not allocate\n operating expenses to our segments. Rather, we allocate them to our\n two segment groups, Devices and Consumer and Commercial. Due to the\n integrated structure of our business, allocations of expenses are\n made in certain cases to incent cross-collaboration among our\n segment groups so that a segment group is not solely burdened by\n the cost of a mutually beneficial activity as we seek to deliver\n seamless experiences across devices, whether on-premises or in the\n cloud.
\n\n Operating expenses are\n attributed to our segment groups as follows:
\n\n
\n| \n | • | \n\n | \n Sales\n and marketing expenses are primarily recorded directly to each\n segment group based on identified customer segment. \n | \n
\n
\n| \n | • | \n\n | \n Research and development expenses are primarily shared across\n the segment groups based on relative gross margin but are mapped\n directly in certain cases where the value of the expense only\n accrues to that segment group. \n | \n
\n
\n| \n | • | \n\n | \n General and administrative expenses are primarily allocated\n based on relative gross margin. \n | \n
\n Certain corporate-level\n activity is not allocated to our segment groups, including costs\n of: legal, including expenses, settlements, and fines; information\n technology; human resources; finance; excise taxes; and impairment,\n integration, and restructuring expenses.
\n\n
\n\n Segment revenue and gross\n margin were as follows during the periods presented:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||||
| \n | \n | \n | \n | \n | ||||||||||
| Year Ended June 30, | \n\n | \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | \n | ||||||||||
| \n Revenue \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||
| \n Devices and Consumer \n | \n \n | \n Licensing \n | \n \n | $ | \n14,969 | \n\n | \n | $ | \n19,528 | \n\n | \n | $ | \n19,427 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n Hardware: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Computing and Gaming\n Hardware \n | \n \n | \n | 10,183 | \n\n | \n | \n | 9,093 | \n\n | \n | \n | 6,149 | \n\n |
| \n | \n | \n Phone Hardware \n | \n \n | \n | 7,524 | \n\n | \n | \n | 1,982 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer\n Hardware \n | \n \n | \n | 17,707 | \n\n | \n | \n | 11,075 | \n\n | \n | \n | 6,149 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 8,825 | \n\n | \n | \n | 7,014 | \n\n | \n | \n | 6,431 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer \n | \n \n | \n | 41,501 | \n\n | \n | \n | 37,617 | \n\n | \n | \n | 32,007 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n | \n | \n | ||||||||||
| \n Commercial \n | \n \n | \n Licensing \n | \n \n | \n | 41,039 | \n\n | \n | \n | 42,085 | \n\n | \n | \n | 39,778 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 10,836 | \n\n | \n | \n | 7,546 | \n\n | \n | \n | 5,661 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Commercial \n | \n \n | \n | 51,875 | \n\n | \n | \n | 49,631 | \n\n | \n | \n | 45,439 | \n\n |
| \n Corporate and Other \n | \n \n | \n | \n | \n | 204 | \n\n | \n | \n | (415 | \n) | \n\n | \n | 403 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n Total revenue \n | \n \n | \n | \n | $ | \n93,580 | \n\n | \n | $ | \n86,833 | \n\n | \n | $ | \n77,849 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||||
| \n | \n | \n | \n | \n | ||||||||||
| Year Ended June 30, | \n\n | \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | \n | ||||||||||
| \n Gross margin \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||
| \n Devices and Consumer \n | \n \n | \n Licensing \n | \n \n | $ | \n13,870 | \n\n | \n | $ | \n17,439 | \n\n | \n | $ | \n16,985 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n Hardware: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Computing and Gaming\n Hardware \n | \n \n | \n | 1,788 | \n\n | \n | \n | 892 | \n\n | \n | \n | 956 | \n\n |
| \n | \n | \n Phone Hardware \n | \n \n | \n | 701 | \n\n | \n | \n | 54 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer\n Hardware \n | \n \n | \n | 2,489 | \n\n | \n | \n | 946 | \n\n | \n | \n | 956 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 2,022 | \n\n | \n | \n | 1,393 | \n\n | \n | \n | 1,951 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer \n | \n \n | \n | 18,381 | \n\n | \n | \n | 19,778 | \n\n | \n | \n | 19,892 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n | \n | \n | ||||||||||
| \n Commercial \n | \n \n | \n Licensing \n | \n \n | \n | 37,830 | \n\n | \n | \n | 38,615 | \n\n | \n | \n | 36,280 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 4,199 | \n\n | \n | \n | 1,855 | \n\n | \n | \n | 922 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Commercial \n | \n \n | \n | 42,029 | \n\n | \n | \n | 40,470 | \n\n | \n | \n | 37,202 | \n\n |
| \n Corporate and Other \n | \n \n | \n | \n | \n | 132 | \n\n | \n | \n | (493 | \n) | \n\n | \n | 370 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n Total gross margin \n | \n \n | \n | \n | $ | \n60,542 | \n\n | \n | $ | \n59,755 | \n\n | \n | $ | \n57,464 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Below are operating\n expenses by segment group. As discussed above, we do not allocate\n operating expenses to our segments.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Devices and Consumer \n | \n \n | $ | \n11,505 | \n\n | \n | $ | \n11,219 | \n\n | \n | $ | \n10,625 | \n\n |
| \n Commercial \n | \n \n | \n | 17,177 | \n\n | \n | \n | 16,993 | \n\n | \n | \n | 16,050 | \n\n |
| \n Corporate and Other \n | \n \n | \n | 3,688 | \n\n | \n | \n | 3,657 | \n\n | \n | \n | 4,025 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total segment operating\n expenses \n | \n \n | \n | 32,370 | \n\n | \n | \n | 31,869 | \n\n | \n | \n | 30,700 | \n\n |
| \n Impairment, integration, and\n restructuring \n | \n \n | \n | 10,011 | \n\n | \n | \n | 127 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total operating expenses \n | \n \n | $ | \n42,381 | \n\n | \n | $ | \n31,996 | \n\n | \n | $ | \n30,700 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n\n Below is operating income\n (loss) by segment group.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Devices and Consumer \n | \n \n | $ | \n6,876 | \n\n | \n | $ | \n8,559 | \n\n | \n | $ | \n9,267 | \n\n |
| \n Commercial \n | \n \n | \n | 24,852 | \n\n | \n | \n | 23,477 | \n\n | \n | \n | 21,152 | \n\n |
| \n Corporate and Other \n | \n \n | \n | (13,567 | \n) | \n\n | \n | (4,277 | \n) | \n\n | \n | (3,655 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total operating income \n | \n \n | $ | \n18,161 | \n\n | \n | $ | \n27,759 | \n\n | \n | $ | \n26,764 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Corporate and Other\n operating income includes adjustments to conform our internal\n accounting policies to U.S. GAAP, corporate-level activity not\n specifically attributed to a segment, and impairment, integration,\n and restructuring expenses. Significant internal accounting\n policies that differ from U.S. GAAP relate to revenue recognition,\n income statement classification, and depreciation.
\n\n Corporate and Other\n activity was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Corporate (a)\n (b) \n | \n \n | $ | \n(13,575 | \n) | \n\n | $ | \n(3,744 | \n) | \n\n | $ | \n(4,102 | \n) | \n
| \n Other (adjustments to U.S.\n GAAP): \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Revenue reconciling\n amounts (c) \n | \n \n | \n | 204 | \n\n | \n | \n | (415 | \n) | \n\n | \n | 403 | \n\n |
| \n Cost of revenue reconciling\n amounts \n | \n \n | \n | (72 | \n) | \n\n | \n | (78 | \n) | \n\n | \n | (31 | \n) | \n
| \n Operating expenses reconciling\n amounts \n | \n \n | \n | (124 | \n) | \n\n | \n | (40 | \n) | \n\n | \n | 75 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total Corporate and Other \n | \n \n | $ | \n(13,567 | \n) | \n\n | $ | \n(4,277 | \n) | \n\n | $ | \n(3,655 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Corporate is presented on the basis of our internal\n accounting policies and excludes the adjustments to U.S. GAAP that\n are presented separately in those line items. \n | \n
| (b) | \n\n Corporate for fiscal year 2015 included impairment,\n integration, and restructuring expenses of $10.0\n billion. \n | \n
| (c) | \n\n Revenue reconciling amounts for fiscal year 2015 included a\n net $303 million of previously deferred net revenue related to\n sales of bundled products and services (“Bundled\n Offerings”). Revenue reconciling amounts for fiscal year 2014\n included a net $349 million of revenue deferrals related to Bundled\n Offerings. Revenue reconciling amounts for fiscal year 2013\n included the recognition of $540 million of revenue previously\n deferred on sales of Windows 7 with an option to upgrade to Windows\n 8 Pro at a discounted price. \n | \n
\n No sales to an individual\n customer or country other than the United States accounted for more\n than 10% of fiscal year 2015, 2014, or 2013 revenue. Revenue,\n classified by the major geographic areas in which our customers are\n located, was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n United\n States (a) \n | \n \n | $ | \n42,941 | \n\n | \n | $ | \n43,474 | \n\n | \n | $ | \n41,344 | \n\n |
| \n Other countries \n | \n \n | \n | 50,639 | \n\n | \n | \n | 43,359 | \n\n | \n | \n | 36,505 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n93,580 | \n\n | \n | $ | \n86,833 | \n\n | \n | $ | \n77,849 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Includes billings to OEMs and certain multinational\n organizations because of the nature of these businesses and the\n impracticability of determining the geographic source of the\n revenue. \n | \n
\n
\n\n Revenue from external\n customers, classified by significant product and service offerings\n were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Microsoft Office system \n | \n \n | $ | \n23,538 | \n\n | \n | $ | \n24,323 | \n\n | \n | $ | \n22,995 | \n\n |
| \n Server products and tools \n | \n \n | \n | 18,612 | \n\n | \n | \n | 17,055 | \n\n | \n | \n | 15,408 | \n\n |
| \n Windows PC operating\n system \n | \n \n | \n | 14,826 | \n\n | \n | \n | 16,856 | \n\n | \n | \n | 17,529 | \n\n |
| \n Xbox \n | \n \n | \n | 9,121 | \n\n | \n | \n | 8,643 | \n\n | \n | \n | 7,100 | \n\n |
| \n Phone \n | \n \n | \n | 7,702 | \n\n | \n | \n | 3,073 | \n\n | \n | \n | 615 | \n\n |
| \n Consulting and product support\n services \n | \n \n | \n | 5,090 | \n\n | \n | \n | 4,767 | \n\n | \n | \n | 4,372 | \n\n |
| \n Advertising \n | \n \n | \n | 4,557 | \n\n | \n | \n | 4,016 | \n\n | \n | \n | 3,387 | \n\n |
| \n Surface \n | \n \n | \n | 3,900 | \n\n | \n | \n | 1,883 | \n\n | \n | \n | 853 | \n\n |
| \n Other \n | \n \n | \n | 6,234 | \n\n | \n | \n | 6,217 | \n\n | \n | \n | 5,590 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n93,580 | \n\n | \n | $ | \n86,833 | \n\n | \n | $ | \n77,849 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Our total Commercial\n Cloud revenue was $5.8 billion, $2.8 billion, and $1.3 billion in\n fiscal years 2015, 2014, and 2013, respectively. These amounts are\n included in their respective product categories in the table\n above.
\n\n Assets are not allocated\n to segments for internal reporting presentations. A portion of\n amortization and depreciation is charged to the respective segment.\n It is impracticable for us to separately identify the amount of\n amortization and depreciation by segment that is included in the\n measure of segment profit or loss.
\n\n Long-lived assets,\n excluding financial instruments and tax assets, classified by the\n location of the controlling statutory company and with countries\n over 10% of the total shown separately, were as follows:
\n\n
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n United States \n | \n \n | $ | \n19,562 | \n\n | \n | $ | \n17,653 | \n\n | \n | $ | \n16,615 | \n\n |
| \n Luxembourg \n | \n \n | \n | 6,879 | \n\n | \n | \n | 6,913 | \n\n | \n | \n | 6,943 | \n\n |
| \n Finland \n | \n \n | \n | 1,757 | \n\n | \n | \n | 9,840 | \n\n | \n | \n | 12 | \n\n |
| \n Other countries \n | \n \n | \n | 8,307 | \n\n | \n | \n | 5,713 | \n\n | \n | \n | 4,159 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n36,505 | \n\n | \n | $ | \n40,119 | \n\n | \n | $ | \n27,729 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n\n The following table\n outlines the estimated future amortization expense related to\n intangible assets held at June 30, 2015:
\n\n
\n| \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | |
| \n | \n \n | \n |||
| \n | \n | |||
| \n Year Ending\n June 30, \n | \n \n | \n | \n | \n |
| \n | \n | |||
| \n 2016 \n | \n \n | $ | \n910 | \n\n |
| \n 2017 \n | \n \n | \n | 755 | \n\n |
| \n 2018 \n | \n \n | \n | 670 | \n\n |
| \n 2019 \n | \n \n | \n | 554 | \n\n |
| \n 2020 \n | \n \n | \n | 495 | \n\n |
| \n Thereafter \n | \n \n | \n | 1,451 | \n\n |
| \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n4,835 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n
\n NOTE 10 —\n GOODWILL
\n\n Changes in the carrying\n amount of goodwill were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n \n June 30, \n\n 2013 \n | \n \n | \n | Acquisitions | \n\n | \n | Other | \n\n | \n | \n \n June 30, \n\n 2014 \n | \n \n | \n | Acquisitions | \n\n | \n | Other | \n\n | \n | June 30, \n 2015 | \n \n | |||||||
| \n | \n \n | \n |||||||||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||
| \n Devices and Consumer \n | \n \n | \n Licensing \n | \n \n | $ | \n866 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n2 | \n\n | \n | $ | \n868 | \n\n | \n | $ | \n4 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n872 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n Hardware: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Computing and Gaming\n Hardware \n | \n \n | \n | 1,689 | \n\n | \n | \n | 0 | \n\n | \n | \n | 9 | \n\n | \n | \n | 1,698 | \n\n | \n | \n | 13 | \n\n | \n | \n | (36 | \n) | \n\n | \n | 1,675 | \n\n |
| \n | \n | \n Phone Hardware \n | \n \n | \n | 0 | \n\n | \n | \n | 5,458 | \n(a) | \n\n | \n | (104 | \n) | \n\n | \n | 5,354 | \n\n | \n | \n | 0 | \n\n | \n | \n | (5,238 | \n) | \n\n | \n | 116 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer\n Hardware \n | \n \n | \n | 1,689 | \n\n | \n | \n | 5,458 | \n\n | \n | \n | (95 | \n) | \n\n | \n | 7,052 | \n\n | \n | \n | 13 | \n\n | \n | \n | (5,274 | \n) | \n\n | \n | 1,791 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 738 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 738 | \n\n | \n | \n | 1,772 | \n\n | \n | \n | (195 | \n) | \n\n | \n | 2,315 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer \n | \n \n | \n | 3,293 | \n\n | \n | \n | 5,458 | \n\n | \n | \n | (93 | \n) | \n\n | \n | 8,658 | \n\n | \n | \n | 1,789 | \n\n | \n | \n | (5,469 | \n) | \n\n | \n | 4,978 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||
| \n Commercial \n | \n \n | \n Licensing \n | \n \n | \n | 10,051 | \n\n | \n | \n | 2 | \n\n | \n | \n | 5 | \n\n | \n | \n | 10,058 | \n\n | \n | \n | 77 | \n\n | \n | \n | (170 | \n) | \n\n | \n | 9,965 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 1,311 | \n\n | \n | \n | 105 | \n\n | \n | \n | (5 | \n) | \n\n | \n | 1,411 | \n\n | \n | \n | 589 | \n\n | \n | \n | (4 | \n) | \n\n | \n | 1,996 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Commercial \n | \n \n | \n | 11,362 | \n\n | \n | \n | 107 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,469 | \n\n | \n | \n | 666 | \n\n | \n | \n | (174 | \n) | \n\n | \n | 11,961 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n Total goodwill \n | \n \n | $ | \n14,655 | \n\n | \n | $ | \n5,565 | \n\n | \n | $ | \n(93 | \n) | \n\n | $ | \n20,127 | \n\n | \n | $ | \n2,455 | \n\n | \n | $ | \n(5,643 | \n) | \n\n | $ | \n16,939 | \n\n | ||
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Goodwill acquired during fiscal year 2014 related to the\n acquisition of NDS. See Note 9 – Business Combinations for\n additional details. \n | \n
\n The measurement periods\n for the valuation of assets acquired and liabilities assumed end as\n soon as information on the facts and circumstances that existed as\n of the acquisition dates becomes available, but do not exceed 12\n months. Adjustments in purchase price allocations may require a\n recasting of the amounts allocated to goodwill retroactive to the\n periods in which the acquisitions occurred.
\n\n Any change in the\n goodwill amounts resulting from foreign currency translations and\n purchase accounting adjustments are presented as\n “Other” in the above table. Also included in\n “Other” are business dispositions and transfers between\n business segments due to reorganizations, as applicable. For fiscal\n year 2015, a $5.1 billion goodwill impairment charge was included\n in “Other,” as discussed further below. This goodwill\n impairment charge was included in impairment, integration, and\n restructuring expenses in our consolidated income statement, and\n reflected in Corporate and Other in our table of operating income\n (loss) by segment group in Note 22 – Segment Information and\n Geographic Data.
\n\n Our accumulated goodwill\n impairment as of June 30, 2015 and 2014 was $11.3 billion and\n $6.2 billion, respectively.
\n\n
\nGoodwill Impairment
\n\n We test goodwill for\n impairment annually on May 1 at the reporting unit level,\n primarily using a discounted cash flow methodology with a\n peer-based, risk-adjusted weighted average cost of capital. We\n believe use of a discounted cash flow approach is the most reliable\n indicator of the fair values of the businesses.
\n\n Upon completion of the\n annual testing as of May 1, 2015, Phone Hardware goodwill was\n determined to be impaired. In the second half of fiscal year 2015,\n Phone Hardware did not meet its sales volume and revenue goals, and\n the mix of units sold had lower margins than planned. These\n results, along with changes in the competitive marketplace and an\n evaluation of business priorities, led to a shift in strategic\n direction and reduced future revenue and profitability expectations\n for the business. As a result of these changes in strategy and\n expectations, we have forecasted reductions in unit volume growth\n rates and lower future cash flows used to estimate the fair value\n of the Phone Hardware reporting unit, which resulted in the\n determination that an impairment adjustment was\n required.
\n\n Because our annual test\n indicated that Phone Hardware’s carrying value exceeded its\n estimated fair value, a second phase of the goodwill impairment\n test (“Step 2”) was performed specific to Phone\n Hardware. Under Step 2, the fair value of all Phone Hardware assets\n and liabilities were estimated, including tangible assets, existing\n technology, patent agreements, and contractual arrangements, for\n the purpose of deriving an estimate of the implied fair value of\n goodwill. The implied fair value of the goodwill was then compared\n to the recorded goodwill to determine the amount of the impairment.\n Assumptions used in measuring the value of these assets and\n liabilities included the discount rates and royalty rates used in\n valuing the intangible assets, and consideration of the market\n environment in valuing the tangible assets.
\n\n No other instances of\n impairment were identified in our May 1, 2015 test. No\n impairment of goodwill was identified as of May 1,\n 2014.
\nPrinciples of\n Consolidation
\n\n The consolidated\n financial statements include the accounts of Microsoft Corporation\n and its subsidiaries. Intercompany transactions and balances have\n been eliminated. Equity investments through which we are able to\n exercise significant influence over but do not control the investee\n and are not the primary beneficiary of the investee’s\n activities are accounted for using the equity method. Investments\n through which we are not able to exercise significant influence\n over the investee and which do not have readily determinable fair\n values are accounted for under the cost method.
\nLong-lived assets, excluding financial instruments and tax\n assets, classified by the location of the controlling statutory\n company and with countries over 10% of the total shown separately,\n were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n United States \n | \n \n | $ | \n19,562 | \n\n | \n | $ | \n17,653 | \n\n | \n | $ | \n16,615 | \n\n |
| \n Luxembourg \n | \n \n | \n | 6,879 | \n\n | \n | \n | 6,913 | \n\n | \n | \n | 6,943 | \n\n |
| \n Finland \n | \n \n | \n | 1,757 | \n\n | \n | \n | 9,840 | \n\n | \n | \n | 12 | \n\n |
| \n Other countries \n | \n \n | \n | 8,307 | \n\n | \n | \n | 5,713 | \n\n | \n | \n | 4,159 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n36,505 | \n\n | \n | $ | \n40,119 | \n\n | \n | $ | \n27,729 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Changes\n in the restructuring liability were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Severance | \n\n | \n | \n \n Asset \n\n Impairments \n\n and Other (a) \n | \n \n | \n | Total | \n\n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| \n Restructuring liability as of\n June 30, 2014 \n | \n \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n |
| \n Restructuring charges \n | \n \n | \n | 1,308 | \n\n | \n | \n | 770 | \n\n | \n | \n | 2,078 | \n\n |
| \n Cash paid \n | \n \n | \n | (701 | \n) | \n\n | \n | (134 | \n) | \n\n | \n | (835 | \n) | \n
| \n Other \n | \n \n | \n | (19 | \n) | \n\n | \n | (387 | \n) | \n\n | \n | (406 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Restructuring liability as of\n June 30, 2015 \n | \n \n | $ | \n588 | \n\n | \n | $ | \n249 | \n\n | \n | $ | \n837 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n “Asset Impairments and Other” primarily reflects\n activities associated with the consolidation of our facilities and\n manufacturing operations, including asset write-downs of $372\n million during fiscal year 2015, as well as contract termination\n costs. \n | \n
\n Stock-based compensation\n expense and related income tax benefits were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Stock-based compensation\n expense \n | \n \n | $ | \n2,574 | \n\n | \n | $ | \n2,446 | \n\n | \n | $ | \n2,406 | \n\n |
| \n Income tax benefits related to\n stock-based compensation \n | \n \n | $ | \n868 | \n\n | \n | $ | \n830 | \n\n | \n | $ | \n842 | \n\n |
| \n | \n \n | \n
\n In fiscal year 2015, our\n Board of Directors declared the following dividends:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Declaration Date | \n\n | \n \n Dividend \n\n Per Share \n | \n \n | \n | Record Date | \n\n | \n | Total Amount | \n\n | \n | Payment Date | \n\n | ||||
| \n | \n \n | \n |||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | (In millions) | \n\n | \n | \n | \n | ||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n September 16,\n 2014 \n | \n \n | \n | $ 0.31 | \n\n | \n | \n | November 20, 2014 | \n\n | \n | \n | $ 2,547 | \n\n | \n | \n | December 11, 2014 | \n\n |
| \n December 3,\n 2014 \n | \n \n | \n | $ 0.31 | \n\n | \n | \n | February 19, 2015 | \n\n | \n | \n | $ 2,532 | \n\n | \n | \n | March 12, 2015 | \n\n |
| \n March 10, 2015 \n | \n \n | \n | $ 0.31 | \n\n | \n | \n | May 21, 2015 | \n\n | \n | \n | $ 2,496 | \n\n | \n | \n | June 11, 2015 | \n\n |
| \n June 9, 2015 \n | \n \n | \n | $ 0.31 | \n\n | \n | \n | August 20, 2015 | \n\n | \n | \n | $ 2,488 | \n\n | \n | \n | September 10, 2015 | \n\n |
| \n | \n \n | \n
\n In fiscal year 2014, our\n Board of Directors declared the following dividends:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Declaration Date | \n\n | \n \n Dividend \n\n Per Share \n | \n \n | \n | Record Date | \n\n | \n | Total Amount | \n\n | \n | Payment Date | \n\n | ||||
| \n | \n \n | \n |||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | (In millions) | \n\n | \n | \n | \n | ||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n September 16, 2013 \n | \n \n | $ | \n0.28 | \n\n | \n | \n | November 21, 2013 | \n\n | \n | $ | \n2,332 | \n\n | \n | \n | December 12, 2013 | \n\n |
| \n November 19, 2013 \n | \n \n | $ | \n0.28 | \n\n | \n | \n | February 20, 2014 | \n\n | \n | $ | \n2,322 | \n\n | \n | \n | March 13, 2014 | \n\n |
| \n March 11, 2014 \n | \n \n | $ | \n0.28 | \n\n | \n | \n | May 15, 2014 | \n\n | \n | $ | \n2,309 | \n\n | \n | \n | June 12, 2014 | \n\n |
| \n June 10, 2014 \n | \n \n | $ | \n0.28 | \n\n | \n | \n | August 21, 2014 | \n\n | \n | $ | \n2,307 | \n\n | \n | \n | September 11, 2014 | \n\n |
| \n | \n \n | \n
Accounting\n Principles
\n\n The consolidated\n financial statements and accompanying notes are prepared in\n accordance with accounting principles generally accepted in the\n United States of America (“U.S. GAAP”).
\n\n We have recast certain\n prior period amounts to conform to the current period presentation,\n with no impact on consolidated net income or cash flows.
\n\n Changes in the carrying\n amount of goodwill were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n \n June 30, \n\n 2013 \n | \n \n | \n | Acquisitions | \n\n | \n | Other | \n\n | \n | \n \n June 30, \n\n 2014 \n | \n \n | \n | Acquisitions | \n\n | \n | Other | \n\n | \n | June 30, \n 2015 | \n \n | |||||||
| \n | \n \n | \n |||||||||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||
| \n Devices and Consumer \n | \n \n | \n Licensing \n | \n \n | $ | \n866 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n2 | \n\n | \n | $ | \n868 | \n\n | \n | $ | \n4 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n872 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n Hardware: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Computing and Gaming\n Hardware \n | \n \n | \n | 1,689 | \n\n | \n | \n | 0 | \n\n | \n | \n | 9 | \n\n | \n | \n | 1,698 | \n\n | \n | \n | 13 | \n\n | \n | \n | (36 | \n) | \n\n | \n | 1,675 | \n\n |
| \n | \n | \n Phone Hardware \n | \n \n | \n | 0 | \n\n | \n | \n | 5,458 | \n(a) | \n\n | \n | (104 | \n) | \n\n | \n | 5,354 | \n\n | \n | \n | 0 | \n\n | \n | \n | (5,238 | \n) | \n\n | \n | 116 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer\n Hardware \n | \n \n | \n | 1,689 | \n\n | \n | \n | 5,458 | \n\n | \n | \n | (95 | \n) | \n\n | \n | 7,052 | \n\n | \n | \n | 13 | \n\n | \n | \n | (5,274 | \n) | \n\n | \n | 1,791 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 738 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 738 | \n\n | \n | \n | 1,772 | \n\n | \n | \n | (195 | \n) | \n\n | \n | 2,315 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer \n | \n \n | \n | 3,293 | \n\n | \n | \n | 5,458 | \n\n | \n | \n | (93 | \n) | \n\n | \n | 8,658 | \n\n | \n | \n | 1,789 | \n\n | \n | \n | (5,469 | \n) | \n\n | \n | 4,978 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||
| \n Commercial \n | \n \n | \n Licensing \n | \n \n | \n | 10,051 | \n\n | \n | \n | 2 | \n\n | \n | \n | 5 | \n\n | \n | \n | 10,058 | \n\n | \n | \n | 77 | \n\n | \n | \n | (170 | \n) | \n\n | \n | 9,965 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 1,311 | \n\n | \n | \n | 105 | \n\n | \n | \n | (5 | \n) | \n\n | \n | 1,411 | \n\n | \n | \n | 589 | \n\n | \n | \n | (4 | \n) | \n\n | \n | 1,996 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Commercial \n | \n \n | \n | 11,362 | \n\n | \n | \n | 107 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,469 | \n\n | \n | \n | 666 | \n\n | \n | \n | (174 | \n) | \n\n | \n | 11,961 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n Total goodwill \n | \n \n | $ | \n14,655 | \n\n | \n | $ | \n5,565 | \n\n | \n | $ | \n(93 | \n) | \n\n | $ | \n20,127 | \n\n | \n | $ | \n2,455 | \n\n | \n | $ | \n(5,643 | \n) | \n\n | $ | \n16,939 | \n\n | ||
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Goodwill acquired during fiscal year 2014 related to the\n acquisition of NDS. See Note 9 – Business Combinations for\n additional details. \n | \n
\n Basic earnings per share\n (“EPS”) is computed based on the weighted average\n number of shares of common stock outstanding during the period.\n Diluted EPS is computed based on the weighted average number of\n shares of common stock plus the effect of dilutive potential common\n shares outstanding during the period using the treasury stock\n method. Dilutive potential common shares include outstanding stock\n options and stock awards.
\nThe\n components of the deferred income tax assets and liabilities were\n as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Deferred Income Tax\n Assets \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Stock-based compensation\n expense \n | \n \n | $ | \n884 | \n\n | \n | $ | \n903 | \n\n |
| \n Other expense items \n | \n \n | \n | 1,531 | \n\n | \n | \n | 1,112 | \n\n |
| \n Restructuring charges \n | \n \n | \n | 211 | \n\n | \n | \n | 0 | \n\n |
| \n Unearned revenue \n | \n \n | \n | 520 | \n\n | \n | \n | 520 | \n\n |
| \n Impaired investments \n | \n \n | \n | 257 | \n\n | \n | \n | 272 | \n\n |
| \n Loss carryforwards \n | \n \n | \n | 1,158 | \n\n | \n | \n | 922 | \n\n |
| \n Depreciation and\n amortization \n | \n \n | \n | 798 | \n\n | \n | \n | 0 | \n\n |
| \n Other revenue items \n | \n \n | \n | 56 | \n\n | \n | \n | 64 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Deferred income tax assets \n | \n \n | \n | 5,415 | \n\n | \n | \n | 3,793 | \n\n |
| \n Less valuation allowance \n | \n \n | \n | (2,265 | \n) | \n\n | \n | (903 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Deferred income tax assets, net of\n valuation allowance \n | \n \n | $ | \n3,150 | \n\n | \n | $ | \n2,890 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n | \n | \n | ||||||
| \n Deferred Income Tax\n Liabilities \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Foreign earnings \n | \n \n | $ | \n(1,280 | \n) | \n\n | $ | \n(1,140 | \n) | \n
| \n Unrealized gain on investments and\n debt \n | \n \n | \n | (2,223 | \n) | \n\n | \n | (1,974 | \n) | \n
| \n Depreciation and\n amortization \n | \n \n | \n | (685 | \n) | \n\n | \n | (470 | \n) | \n
| \n Other \n | \n \n | \n | (29 | \n) | \n\n | \n | (87 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Deferred income tax\n liabilities \n | \n \n | \n | (4,217 | \n) | \n\n | \n | (3,671 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net deferred income tax assets\n (liabilities) \n | \n \n | $ | \n(1,067 | \n) | \n\n | $ | \n(781 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | ||||||
| \n Reported As \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Current deferred income tax\n assets \n | \n \n | $ | \n1,915 | \n\n | \n | $ | \n1,941 | \n\n |
| \n Other current liabilities \n | \n \n | \n | (211 | \n) | \n\n | \n | (125 | \n) | \n
| \n Other long-term assets \n | \n \n | \n | 64 | \n\n | \n | \n | 131 | \n\n |
| \n Long-term deferred income tax\n liabilities \n | \n \n | \n | (2,835 | \n) | \n\n | \n | (2,728 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net deferred income tax assets\n (liabilities) \n | \n \n | $ | \n(1,067 | \n) | \n\n | $ | \n(781 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n NOTE 6 — FAIR VALUE MEASUREMENTS
\n Assets and Liabilities\n Measured at Fair Value on a Recurring Basis
\nThe\n following tables present the fair value of our financial\n instruments that are measured at fair value on a recurring\n basis:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | \n \n Gross \n\n Fair \n\n Value \n | \n \n | \n | Netting (a) | \n\n | \n | Net Fair \n Value | \n \n | ||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| June 30, 2015 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Assets \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Mutual funds \n | \n \n | $ | \n1,100 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n1,100 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n1,100 | \n\n |
| \n Commercial paper \n | \n \n | \n | 0 | \n\n | \n | \n | 1 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1 | \n\n |
| \n Certificates of deposit \n | \n \n | \n | 0 | \n\n | \n | \n | 906 | \n\n | \n | \n | 0 | \n\n | \n | \n | 906 | \n\n | \n | \n | 0 | \n\n | \n | \n | 906 | \n\n |
| \n U.S. government and agency\n securities \n | \n \n | \n | 71,930 | \n\n | \n | \n | 955 | \n\n | \n | \n | 0 | \n\n | \n | \n | 72,885 | \n\n | \n | \n | 0 | \n\n | \n | \n | 72,885 | \n\n |
| \n Foreign government bonds \n | \n \n | \n | 131 | \n\n | \n | \n | 5,299 | \n\n | \n | \n | 0 | \n\n | \n | \n | 5,430 | \n\n | \n | \n | 0 | \n\n | \n | \n | 5,430 | \n\n |
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 0 | \n\n | \n | \n | 4,917 | \n\n | \n | \n | 0 | \n\n | \n | \n | 4,917 | \n\n | \n | \n | 0 | \n\n | \n | \n | 4,917 | \n\n |
| \n Corporate notes and bonds \n | \n \n | \n | 0 | \n\n | \n | \n | 7,108 | \n\n | \n | \n | 1 | \n\n | \n | \n | 7,109 | \n\n | \n | \n | 0 | \n\n | \n | \n | 7,109 | \n\n |
| \n Municipal securities \n | \n \n | \n | 0 | \n\n | \n | \n | 319 | \n\n | \n | \n | 0 | \n\n | \n | \n | 319 | \n\n | \n | \n | 0 | \n\n | \n | \n | 319 | \n\n |
| \n Common and preferred stock \n | \n \n | \n | 8,585 | \n\n | \n | \n | 2,277 | \n\n | \n | \n | 14 | \n\n | \n | \n | 10,876 | \n\n | \n | \n | 0 | \n\n | \n | \n | 10,876 | \n\n |
| \n Derivatives \n | \n \n | \n | 4 | \n\n | \n | \n | 979 | \n\n | \n | \n | 5 | \n\n | \n | \n | 988 | \n\n | \n | \n | (162 | \n) | \n\n | \n | 826 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n81,750 | \n\n | \n | $ | \n22,761 | \n\n | \n | $ | \n20 | \n\n | \n | $ | \n104,531 | \n\n | \n | $ | \n(162 | \n) | \n\n | $ | \n104,369 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Liabilities \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Derivatives and other \n | \n \n | $ | \n5 | \n\n | \n | $ | \n159 | \n\n | \n | $ | \n54 | \n\n | \n | $ | \n218 | \n\n | \n | $ | \n(161 | \n) | \n\n | $ | \n57 | \n\n |
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| (In millions) | \n\n | \n | Level 1 | \n\n | \n | \n | Level 2 | \n\n | \n | \n | Level 3 | \n\n | \n | \n \n \n | \n Gross \n \n Fair \n\n Value \n | \n \n \n \n | \n \n | \n | Netting | \n(a) | \n\n | \n | \n Net Fair \n Value | \n \n | \n
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| June 30, 2014 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Assets \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Mutual funds \n | \n \n | $ | \n590 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n590 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n590 | \n\n |
| \n Commercial paper \n | \n \n | \n | 0 | \n\n | \n | \n | 189 | \n\n | \n | \n | 0 | \n\n | \n | \n | 189 | \n\n | \n | \n | 0 | \n\n | \n | \n | 189 | \n\n |
| \n Certificates of deposit \n | \n \n | \n | 0 | \n\n | \n | \n | 1,197 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,197 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,197 | \n\n |
| \n U.S. government and agency\n securities \n | \n \n | \n | 66,288 | \n\n | \n | \n | 745 | \n\n | \n | \n | 0 | \n\n | \n | \n | 67,033 | \n\n | \n | \n | 0 | \n\n | \n | \n | 67,033 | \n\n |
| \n Foreign government bonds \n | \n \n | \n | 139 | \n\n | \n | \n | 3,210 | \n\n | \n | \n | 0 | \n\n | \n | \n | 3,349 | \n\n | \n | \n | 0 | \n\n | \n | \n | 3,349 | \n\n |
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 0 | \n\n | \n | \n | 1,015 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,015 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,015 | \n\n |
| \n Corporate notes and bonds \n | \n \n | \n | 0 | \n\n | \n | \n | 6,863 | \n\n | \n | \n | 0 | \n\n | \n | \n | 6,863 | \n\n | \n | \n | 0 | \n\n | \n | \n | 6,863 | \n\n |
| \n Municipal securities \n | \n \n | \n | 0 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n | \n | \n | 332 | \n\n |
| \n Common and preferred stock \n | \n \n | \n | 9,552 | \n\n | \n | \n | 1,825 | \n\n | \n | \n | 14 | \n\n | \n | \n | 11,391 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,391 | \n\n |
| \n Derivatives \n | \n \n | \n | 5 | \n\n | \n | \n | 348 | \n\n | \n | \n | 7 | \n\n | \n | \n | 360 | \n\n | \n | \n | (155 | \n) | \n\n | \n | 205 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n76,574 | \n\n | \n | $ | \n15,724 | \n\n | \n | $ | \n21 | \n\n | \n | $ | \n92,319 | \n\n | \n | $ | \n(155 | \n) | \n\n | $ | \n92,164 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Liabilities \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Derivatives and other \n | \n \n | $ | \n5 | \n\n | \n | $ | \n153 | \n\n | \n | $ | \n126 | \n\n | \n | $ | \n284 | \n\n | \n | $ | \n(155 | \n) | \n\n | $ | \n129 | \n\n |
| \n | \n \n | \n
\n
\n| (a) | \n\n These amounts represent the impact of netting derivative\n assets and derivative liabilities when a legally enforceable master\n netting agreement exists and fair value adjustments related to our\n own credit risk and counterparty credit risk. \n | \n
The\n changes in our Level 3 financial instruments that are measured at\n fair value on a recurring basis were immaterial during the periods\n presented.
\n\n
\nThe\n following table reconciles the total “Net Fair Value”\n of assets above to the balance sheet presentation of these same\n assets in Note 4 – Investments.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||||||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Net fair value of assets measured at\n fair value on a recurring basis \n | \n \n | $ | \n104,369 | \n\n | \n | $ | \n92,164 | \n\n |
| \n Cash \n | \n \n | \n | 3,679 | \n\n | \n | \n | 4,980 | \n\n |
| \n Common and preferred stock measured\n at fair value on a nonrecurring basis \n | \n \n | \n | 561 | \n\n | \n | \n | 520 | \n\n |
| \n Other investments measured at fair\n value on a nonrecurring basis \n | \n \n | \n | 589 | \n\n | \n | \n | 1,150 | \n\n |
| \n Less derivative net assets classified\n as other current assets \n | \n \n | \n | (648 | \n) | \n\n | \n | (38 | \n) | \n
| \n Other \n | \n \n | \n | 4 | \n\n | \n | \n | (6 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Recorded basis of investment\n components \n | \n \n | $ | \n108,554 | \n\n | \n | $ | \n98,770 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Financial Assets and\n Liabilities Measured at Fair Value on a Nonrecurring\n Basis
\nDuring\n fiscal year 2015 and 2014, we did not record any material\n other-than-temporary impairments on financial assets required to be\n measured at fair value on a nonrecurring basis.
\n \n \n\n Maturities of our\n long-term debt for each of the next five years and thereafter are\n as follows:
\n\n
\n| \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | |
| \n | \n \n | \n |||
| \n | \n | |||
| \n Year Ending\n June 30, \n | \n \n | \n | \n | \n |
| \n | \n | |||
| \n 2016 \n | \n \n | $ | \n2,500 | \n\n |
| \n 2017 \n | \n \n | \n | 0 | \n\n |
| \n 2018 \n | \n \n | \n | 1,050 | \n\n |
| \n 2019 \n | \n \n | \n | 2.250 | \n\n |
| \n 2020 \n | \n \n | \n | 1,500 | \n\n |
| \n Thereafter \n | \n \n | \n | 23,163 | \n\n |
| \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n30,463 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n
\n The components of other\n income (expense), net were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Dividends and interest\n income \n | \n \n | $ | \n766 | \n\n | \n | $ | \n883 | \n\n | \n | $ | \n677 | \n\n |
| \n Interest expense \n | \n \n | \n | (781 | \n) | \n\n | \n | (597 | \n) | \n\n | \n | (429 | \n) | \n
| \n Net recognized gains on\n investments \n | \n \n | \n | 716 | \n\n | \n | \n | 437 | \n\n | \n | \n | 116 | \n\n |
| \n Net losses on derivatives \n | \n \n | \n | (423 | \n) | \n\n | \n | (328 | \n) | \n\n | \n | (196 | \n) | \n
| \n Net gains (losses) on foreign\n currency remeasurements \n | \n \n | \n | 335 | \n\n | \n | \n | (165 | \n) | \n\n | \n | (74 | \n) | \n
| \n Other \n | \n \n | \n | (267 | \n) | \n\n | \n | (169 | \n) | \n\n | \n | 194 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n346 | \n\n | \n | $ | \n61 | \n\n | \n | $ | \n288 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n U.S. and foreign\n components of income before income taxes were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||||||||||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n U.S. \n | \n \n | $ | \n7,363 | \n\n | \n | $ | \n7,127 | \n\n | \n | $ | \n6,674 | \n\n |
| \n Foreign \n | \n \n | \n | 11,144 | \n\n | \n | \n | 20,693 | \n\n | \n | \n | 20,378 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Income before income taxes \n | \n \n | $ | \n18,507 | \n\n | \n | $ | \n27,820 | \n\n | \n | $ | \n27,052 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||||
| \n | \n | \n | \n | \n | ||||||||||
| Year Ended June 30, | \n\n | \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | \n | ||||||||||
| \n Revenue \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||
| \n Devices and Consumer \n | \n \n | \n Licensing \n | \n \n | $ | \n14,969 | \n\n | \n | $ | \n19,528 | \n\n | \n | $ | \n19,427 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n Hardware: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Computing and Gaming\n Hardware \n | \n \n | \n | 10,183 | \n\n | \n | \n | 9,093 | \n\n | \n | \n | 6,149 | \n\n |
| \n | \n | \n Phone Hardware \n | \n \n | \n | 7,524 | \n\n | \n | \n | 1,982 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer\n Hardware \n | \n \n | \n | 17,707 | \n\n | \n | \n | 11,075 | \n\n | \n | \n | 6,149 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 8,825 | \n\n | \n | \n | 7,014 | \n\n | \n | \n | 6,431 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer \n | \n \n | \n | 41,501 | \n\n | \n | \n | 37,617 | \n\n | \n | \n | 32,007 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n | \n | \n | ||||||||||
| \n Commercial \n | \n \n | \n Licensing \n | \n \n | \n | 41,039 | \n\n | \n | \n | 42,085 | \n\n | \n | \n | 39,778 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 10,836 | \n\n | \n | \n | 7,546 | \n\n | \n | \n | 5,661 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Commercial \n | \n \n | \n | 51,875 | \n\n | \n | \n | 49,631 | \n\n | \n | \n | 45,439 | \n\n |
| \n Corporate and Other \n | \n \n | \n | \n | \n | 204 | \n\n | \n | \n | (415 | \n) | \n\n | \n | 403 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n Total revenue \n | \n \n | \n | \n | $ | \n93,580 | \n\n | \n | $ | \n86,833 | \n\n | \n | $ | \n77,849 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Income Taxes
\n\n Income tax expense\n includes U.S. and international income taxes, the provision for\n U.S. taxes on undistributed earnings of international subsidiaries\n not deemed to be permanently invested, and interest and penalties\n on uncertain tax positions. Certain income and expenses are not\n reported in tax returns and financial statements in the same year.\n The tax effect of such temporary differences is reported as\n deferred income taxes. Deferred tax assets are reported net of a\n valuation allowance when it is more likely than not that a tax\n benefit will not be realized. The deferred income taxes are\n classified as current or long-term based on the classification of\n the related asset or liability.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Tax contingencies and other tax\n liabilities \n | \n \n | $ | \n12,290 | \n\n | \n | $ | \n10,510 | \n\n |
| \n Other \n | \n \n | \n | 1,254 | \n\n | \n | \n | 1,084 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n13,544 | \n\n | \n | $ | \n11,594 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n NOTE 16 — OTHER\n LONG-TERM LIABILITIES
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Tax contingencies and other tax\n liabilities \n | \n \n | $ | \n12,290 | \n\n | \n | $ | \n10,510 | \n\n |
| \n Other \n | \n \n | \n | 1,254 | \n\n | \n | \n | 1,084 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n13,544 | \n\n | \n | $ | \n11,594 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Foreign Currencies
\n\n Assets and liabilities\n recorded in foreign currencies are translated at the exchange rate\n on the balance sheet date. Revenue and expenses are translated at\n average rates of exchange prevailing during the year. Translation\n adjustments resulting from this process are recorded to other\n comprehensive income (“OCI”).
\n\n The aggregate changes in\n the balance of unrecognized tax benefits were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Balance, beginning of year \n | \n \n | $ | \n8,714 | \n\n | \n | $ | \n8,648 | \n\n | \n | $ | \n7,202 | \n\n |
| \n Decreases related to\n settlements \n | \n \n | \n | (50 | \n) | \n\n | \n | (583 | \n) | \n\n | \n | (30 | \n) | \n
| \n Increases for tax positions related\n to the current year \n | \n \n | \n | 1,091 | \n\n | \n | \n | 566 | \n\n | \n | \n | 612 | \n\n |
| \n Increases for tax positions related\n to prior years \n | \n \n | \n | 94 | \n\n | \n | \n | 217 | \n\n | \n | \n | 931 | \n\n |
| \n Decreases for tax positions related\n to prior years \n | \n \n | \n | (144 | \n) | \n\n | \n | (95 | \n) | \n\n | \n | (65 | \n) | \n
| \n Decreases due to lapsed statutes of\n limitations \n | \n \n | \n | (106 | \n) | \n\n | \n | (39 | \n) | \n\n | \n | (2 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Balance, end of year \n | \n \n | $ | \n9,599 | \n\n | \n | $ | \n8,714 | \n\n | \n | $ | \n8,648 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n The components of the\n provision for income taxes were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Current Taxes \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n U.S. federal \n | \n \n | $ | \n3,661 | \n\n | \n | $ | \n3,738 | \n\n | \n | $ | \n3,131 | \n\n |
| \n U.S. state and local \n | \n \n | \n | 364 | \n\n | \n | \n | 266 | \n\n | \n | \n | 332 | \n\n |
| \n Foreign \n | \n \n | \n | 2,065 | \n\n | \n | \n | 2,073 | \n\n | \n | \n | 1,745 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Current taxes \n | \n \n | \n | 6,090 | \n\n | \n | \n | 6,077 | \n\n | \n | \n | 5,208 | \n\n |
| \n | \n | \n | \n | |||||||||
| \n Deferred Taxes \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Deferred taxes \n | \n \n | \n | 224 | \n\n | \n | \n | (331 | \n) | \n\n | \n | (19 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Provision for income taxes \n | \n \n | $ | \n6,314 | \n\n | \n | $ | \n5,746 | \n\n | \n | $ | \n5,189 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Product Warranty
\n\n We provide for the\n estimated costs of fulfilling our obligations under hardware and\n software warranties at the time the related revenue is recognized.\n For hardware warranties, we estimate the costs based on historical\n and projected product failure rates, historical and projected\n repair costs, and knowledge of specific product failures (if any).\n The specific hardware warranty terms and conditions vary depending\n upon the product sold and the country in which we do business, but\n generally include parts and labor over a period generally ranging\n from 90 days to three years. For software warranties, we\n estimate the costs to provide bug fixes, such as security patches,\n over the estimated life of the software. We regularly reevaluate\n our estimates to assess the adequacy of the recorded warranty\n liabilities and adjust the amounts as necessary.
\nRevenue Recognition
\n\n Revenue is recognized\n when persuasive evidence of an arrangement exists, delivery has\n occurred, the fee is fixed or determinable, and collectability is\n probable. Revenue generally is recognized net of allowances for\n returns and any taxes collected from customers and subsequently\n remitted to governmental authorities.
\n\n Revenue recognition for\n multiple-element arrangements requires judgment to determine if\n multiple elements exist, whether elements can be accounted for as\n separate units of accounting, and if so, the fair value for each of\n the elements.
\n\n Microsoft enters into\n arrangements that can include various combinations of software,\n services, and hardware. Where elements are delivered over different\n periods of time, and when allowed under U.S. GAAP, revenue is\n allocated to the respective elements based on their relative\n selling prices at the inception of the arrangement, and revenue is\n recognized as each element is delivered. We use a hierarchy to\n determine the fair value to be used for allocating revenue to\n elements: (i) vendor-specific objective evidence of fair value\n (“VSOE”), (ii) third-party evidence, and\n (iii) best estimate of selling price (“ESP”). For\n software elements, we follow the industry specific software\n guidance which only allows for the use of VSOE in establishing fair\n value. Generally, VSOE is the price charged when the deliverable is\n sold separately or the price established by management for a\n product that is not yet sold if it is probable that the price will\n not change before introduction into the marketplace. ESPs are\n established as best estimates of what the selling prices would be\n if the deliverables were sold regularly on a stand-alone basis. Our\n process for determining ESPs requires judgment and considers\n multiple factors that may vary over time depending upon the unique\n facts and circumstances related to each deliverable.
\n\n Revenue for retail\n packaged products, products licensed to original equipment\n manufacturers (“OEMs”), and perpetual licenses under\n certain volume licensing programs generally is recognized as\n products are shipped or made available.
\n\n Technology guarantee\n programs are accounted for as multiple-element arrangements as\n customers receive free or significantly discounted rights to use\n upcoming new versions of a software product if they license\n existing versions of the product during the eligibility period.\n Revenue is allocated between the existing product and the new\n product, and revenue allocated to the new product is deferred until\n that version is delivered. The revenue allocation is based on the\n VSOE of fair value of the products. The VSOE of fair value for\n upcoming new products are based on the price determined by\n management having the relevant authority when the element is not\n yet sold separately, but is expected to be sold in the near future\n at the price set by management.
\n\n Software updates that\n will be provided free of charge are evaluated on a case-by-case\n basis to determine whether they meet the definition of an upgrade\n and create a multiple-element arrangement, which may require\n revenue to be deferred and recognized when the upgrade is\n delivered, or if it is determined that implied post-contract\n customer support (“PCS”) is being provided, the\n arrangement is accounted for as a multiple-element arrangement and\n all revenue from the arrangement is deferred and recognized over\n the implied PCS term when the VSOE of fair value does not exist. If\n updates are determined to not meet the definition of an upgrade,\n revenue is generally recognized as products are shipped or made\n available.
\n\n Certain volume licensing\n arrangements include a perpetual license for current products\n combined with rights to receive unspecified future versions of\n software products, which we have determined are additional software\n products and are therefore accounted for as subscriptions, with\n billings recorded as unearned revenue and recognized as revenue\n ratably over the coverage period. Arrangements that include\n term-based licenses for current products with the right to use\n unspecified future versions of the software during the coverage\n period, are also accounted for as subscriptions, with revenue\n recognized ratably over the coverage period.
\n\n Revenue from cloud-based\n services arrangements that allow for the use of a hosted software\n product or service over a contractually determined period of time\n without taking possession of software are accounted for as\n subscriptions with billings recorded as unearned revenue and\n recognized as revenue ratably over the coverage period beginning on\n the date the service is made available to customers. Revenue from\n cloud-based services arrangements that are provided on a\n consumption basis (for example, the amount of storage used in a\n particular period) is recognized commensurate with the customer\n utilization of such resources.
\n\n Some volume licensing\n arrangements include time-based subscriptions for cloud-based\n services and software offerings that are accounted for as\n subscriptions. These arrangements are considered multiple-element\n arrangements. However, because all elements are accounted for as\n subscriptions and have the same coverage period and delivery\n pattern, they have the same revenue recognition timing.
\n\n Revenue related to\n phones, Surface devices, Xbox consoles, games published by us, and\n other hardware components is generally recognized when ownership is\n transferred to the resellers or to end customers when selling\n directly through Microsoft retail stores and online marketplaces. A\n portion of revenue may be deferred when these products are combined\n with software elements, and/or services. Revenue related to\n licensing for games published by third parties for use on the Xbox\n consoles is recognized when games are manufactured by the game\n publishers.
\n\n Display advertising\n revenue is recognized as advertisements are displayed. Search\n advertising revenue is recognized when the ad appears in the search\n results or when the action necessary to earn the revenue has been\n completed. Consulting services revenue is recognized as services\n are rendered, generally based on the negotiated hourly rate in the\n consulting arrangement and the number of hours worked during the\n period. Consulting revenue for fixed-price services arrangements is\n recognized as services are provided. Revenue from prepaid points\n redeemable for the purchase of software or services is recognized\n upon redemption of the points and delivery of the software or\n services.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions, except per share amounts) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |||||
| \n | \n \n | \n |||||||||||||||||||
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| Quarter Ended | \n\n | \n | September 30 | \n\n | \n | \n | December 31 | \n\n | \n | \n | March 31 | \n\n | \n | \n | June 30 | \n\n | \n | \n | Total | \n\n |
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| \n Fiscal Year 2015 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| \n Revenue \n | \n \n | \n | $ 23,201 | \n\n | \n | \n | $ 26,470 | \n\n | \n | \n | $ 21,729 | \n\n | \n | \n | $ 22,180 | \n\n | \n | \n | $ 93,580 | \n\n |
| \n Gross margin \n | \n \n | \n | 14,928 | \n\n | \n | \n | 16,334 | \n\n | \n | \n | 14,568 | \n\n | \n | \n | 14,712 | \n\n | \n | \n | 60,542 | \n\n |
| \n Net income (loss) \n | \n \n | \n | 4,540 | \n\n | \n | \n | 5,863 | \n\n | \n | \n | 4,985 | \n\n | \n | \n | (3,195 | \n) (a) | \n\n | \n | 12,193 | \n(b) | \n
| \n Basic earnings (loss) per\n share \n | \n \n | \n | 0.55 | \n\n | \n | \n | 0.71 | \n\n | \n | \n | 0.61 | \n\n | \n | \n | (0.40 | \n) | \n\n | \n | 1.49 | \n\n |
| \n Diluted earnings (loss) per\n share \n | \n \n | \n | 0.54 | \n\n | \n | \n | 0.71 | \n\n | \n | \n | 0.61 | \n\n | \n | \n | (0.40 | \n) (a) | \n\n | \n | 1.48 | \n(b) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| \n Fiscal Year 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| \n Revenue \n | \n \n | \n | $ 18,529 | \n\n | \n | \n | $ 24,519 | \n\n | \n | \n | $ 20,403 | \n\n | \n | \n | $ 23,382 | \n\n | \n | \n | $ 86,833 | \n\n |
| \n Gross margin \n | \n \n | \n | 13,384 | \n\n | \n | \n | 16,197 | \n\n | \n | \n | 14,425 | \n\n | \n | \n | 15,749 | \n\n | \n | \n | 59,755 | \n\n |
| \n Net income \n | \n \n | \n | 5,244 | \n\n | \n | \n | 6,558 | \n\n | \n | \n | 5,660 | \n\n | \n | \n | 4,612 | \n\n (c) | \n\n | \n | 22,074 | \n(c) | \n
| \n Basic earnings per share \n | \n \n | \n | 0.63 | \n\n | \n | \n | 0.79 | \n\n | \n | \n | 0.68 | \n\n | \n | \n | 0.56 | \n\n | \n | \n | 2.66 | \n\n |
| \n Diluted earnings per share \n | \n \n | \n | 0.62 | \n\n | \n | \n | 0.78 | \n\n | \n | \n | 0.68 | \n\n | \n | \n | 0.55 | \n\n (c) | \n\n | \n | 2.63 | \n(c) | \n
| \n | \n \n | \n
\n
\n| (a) | \n\n Includes $7.5 billion of goodwill and asset impairment\n charges related to Phone Hardware, as well as $940 million of\n integration and restructuring expenses, primarily costs associated\n with our Phone Hardware Restructuring Plan, which decreased fourth\n quarter fiscal year 2015 net income by $8.4 billion and diluted EPS\n by $1.02. \n | \n
| (b) | \n\n Includes $7.5 billion of goodwill and asset impairment\n charges related to Phone Hardware, as well as $2.5 billion of\n integration and restructuring expenses, primarily costs associated\n with our restructuring plans, which decreased fiscal year 2015 net\n income by $10.0 billion and diluted EPS by $1.15. \n | \n
| (c) | \n\n Includes a tax provision adjustment recorded in the fourth\n quarter of fiscal year 2014 related to adjustments to prior\n years’ liabilities for intercompany transfer pricing which\n decreased net income by $458 million and diluted EPS by\n $0.05. \n | \n
\n NOTE 2 —\n EARNINGS PER SHARE
\n\n Basic earnings per share\n (“EPS”) is computed based on the weighted average\n number of shares of common stock outstanding during the period.\n Diluted EPS is computed based on the weighted average number of\n shares of common stock plus the effect of dilutive potential common\n shares outstanding during the period using the treasury stock\n method. Dilutive potential common shares include outstanding stock\n options and stock awards.
\n\n The components of basic\n and diluted EPS were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions, except earnings per share) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Net income available for common\n shareholders (A) \n | \n \n | $ | \n12,193 | \n\n | \n | $ | \n22,074 | \n\n | \n | $ | \n21,863 | \n\n |
| \n Weighted average outstanding shares\n of common stock (B) \n | \n \n | \n | 8,177 | \n\n | \n | \n | 8,299 | \n\n | \n | \n | 8,375 | \n\n |
| \n Dilutive effect of stock-based\n awards \n | \n \n | \n | 77 | \n\n | \n | \n | 100 | \n\n | \n | \n | 95 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Common stock and common stock\n equivalents (C) \n | \n \n | \n | 8,254 | \n\n | \n | \n | 8,399 | \n\n | \n | \n | 8,470 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | |||||||||
| \n Earnings Per Share \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Basic (A/B) \n | \n \n | $ | \n1.49 | \n\n | \n | $ | \n2.66 | \n\n | \n | $ | \n2.61 | \n\n |
| \n Diluted (A/C) \n | \n \n | $ | \n1.48 | \n\n | \n | $ | \n2.63 | \n\n | \n | $ | \n2.58 | \n\n |
| \n | \n \n | \n
\n Anti-dilutive stock-based\n awards excluded from the calculations of diluted EPS were\n immaterial during the periods presented.
\n\n The components of our\n long-term debt, including the current portion, and the associated\n interest rates were as follows as of June 30, 2015 and\n 2014:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Due Date | \n\n | \n \n Face Value \n\n June 30, | \n \n | \n | \n \n Face Value \n\n June 30, | \n \n | \n | \n \n Stated \n Rate \n | \n \n | \n | \n \n Effective \n Rate \n | \n \n | ||||
| \n | \n \n | \n |||||||||||||||
| \n | \n | (In millions) | \n\n | \n | \n | \n | \n | \n | \n | |||||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n Notes \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n September 25, 2015 \n | \n \n | $ | \n1,750 | \n\n | \n | $ | \n1,750 | \n\n | \n | \n | 1.625% | \n\n | \n | \n | 1.795% | \n\n |
| \n February 8, 2016 \n | \n \n | \n | 750 | \n\n | \n | \n | 750 | \n\n | \n | \n | 2.500% | \n\n | \n | \n | 2.642% | \n\n |
| \n November 15, 2017 \n | \n \n | \n | 600 | \n\n | \n | \n | 600 | \n\n | \n | \n | 0.875% | \n\n | \n | \n | 1.084% | \n\n |
| \n May 1, 2018 \n | \n \n | \n | 450 | \n\n | \n | \n | 450 | \n\n | \n | \n | 1.000% | \n\n | \n | \n | 1.106% | \n\n |
| \n December 6, 2018 \n | \n \n | \n | 1,250 | \n\n | \n | \n | 1,250 | \n\n | \n | \n | 1.625% | \n\n | \n | \n | 1.824% | \n\n |
| \n June 1, 2019 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 4.200% | \n\n | \n | \n | 4.379% | \n\n |
| \n February 12,\n 2020 (a) \n | \n \n | \n | 1,500 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1.850% | \n\n | \n | \n | 1.935% | \n\n |
| \n October 1, 2020 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 3.000% | \n\n | \n | \n | 3.137% | \n\n |
| \n February 8, 2021 \n | \n \n | \n | 500 | \n\n | \n | \n | 500 | \n\n | \n | \n | 4.000% | \n\n | \n | \n | 4.082% | \n\n |
| \n December 6,\n 2021 (b) \n | \n \n | \n | 1,950 | \n\n | \n | \n | 2,396 | \n\n | \n | \n | 2.125% | \n\n | \n | \n | 2.233% | \n\n |
| \n February 12,\n 2022 (a) \n | \n \n | \n | 1,500 | \n\n | \n | \n | 0 | \n\n | \n | \n | 2.375% | \n\n | \n | \n | 2.466% | \n\n |
| \n November 15, 2022 \n | \n \n | \n | 750 | \n\n | \n | \n | 750 | \n\n | \n | \n | 2.125% | \n\n | \n | \n | 2.239% | \n\n |
| \n May 1, 2023 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 2.375% | \n\n | \n | \n | 2.465% | \n\n |
| \n December 15, 2023 \n | \n \n | \n | 1,500 | \n\n | \n | \n | 1,500 | \n\n | \n | \n | 3.625% | \n\n | \n | \n | 3.726% | \n\n |
| \n February 12,\n 2025 (a) \n | \n \n | \n | 2,250 | \n\n | \n | \n | 0 | \n\n | \n | \n | 2.700% | \n\n | \n | \n | 2.772% | \n\n |
| \n December 6,\n 2028 (b) \n | \n \n | \n | 1,950 | \n\n | \n | \n | 2,396 | \n\n | \n | \n | 3.125% | \n\n | \n | \n | 3.218% | \n\n |
| \n May 2,\n 2033 (b) \n | \n \n | \n | 613 | \n\n | \n | \n | 753 | \n\n | \n | \n | 2.625% | \n\n | \n | \n | 2.690% | \n\n |
| \n February 12,\n 2035 (a) \n | \n \n | \n | 1,500 | \n\n | \n | \n | 0 | \n\n | \n | \n | 3.500% | \n\n | \n | \n | 3.604% | \n\n |
| \n June 1, 2039 \n | \n \n | \n | 750 | \n\n | \n | \n | 750 | \n\n | \n | \n | 5.200% | \n\n | \n | \n | 5.240% | \n\n |
| \n October 1, 2040 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 4.500% | \n\n | \n | \n | 4.567% | \n\n |
| \n February 8, 2041 \n | \n \n | \n | 1,000 | \n\n | \n | \n | 1,000 | \n\n | \n | \n | 5.300% | \n\n | \n | \n | 5.361% | \n\n |
| \n November 15, 2042 \n | \n \n | \n | 900 | \n\n | \n | \n | 900 | \n\n | \n | \n | 3.500% | \n\n | \n | \n | 3.571% | \n\n |
| \n May 1, 2043 \n | \n \n | \n | 500 | \n\n | \n | \n | 500 | \n\n | \n | \n | 3.750% | \n\n | \n | \n | 3.829% | \n\n |
| \n December 15, 2043 \n | \n \n | \n | 500 | \n\n | \n | \n | 500 | \n\n | \n | \n | 4.875% | \n\n | \n | \n | 4.918% | \n\n |
| \n February 12,\n 2045 (a) \n | \n \n | \n | 1,750 | \n\n | \n | \n | 0 | \n\n | \n | \n | 3.750% | \n\n | \n | \n | 3.800% | \n\n |
| \n February 12,\n 2055 (a) \n | \n \n | \n | 2,250 | \n\n | \n | \n | 0 | \n\n | \n | \n | 4.000% | \n\n | \n | \n | 4.063% | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n Total \n | \n \n | $ | \n30,463 | \n\n | \n | $ | \n20,745 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
\n
\n| (a) | \n\n In\n February 2015, we issued $10.8 billion of debt\n securities. \n | \n
| (b) | \n\n Euro-denominated debt securities. \n | \n
\n The components of\n property and equipment were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||||||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Land \n | \n \n | $ | \n769 | \n\n | \n | $ | \n541 | \n\n |
| \n Buildings and improvements \n | \n \n | \n | 10,800 | \n\n | \n | \n | 8,867 | \n\n |
| \n Leasehold improvements \n | \n \n | \n | 3,577 | \n\n | \n | \n | 3,560 | \n\n |
| \n Computer equipment and\n software \n | \n \n | \n | 13,612 | \n\n | \n | \n | 11,430 | \n\n |
| \n Furniture and equipment \n | \n \n | \n | 3,579 | \n\n | \n | \n | 3,406 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total, at cost \n | \n \n | \n | 32,337 | \n\n | \n | \n | 27,804 | \n\n |
| \n Accumulated depreciation \n | \n \n | \n | (17,606 | \n) | \n\n | \n | (14,793 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total, net \n | \n \n | $ | \n14,731 | \n\n | \n | $ | \n13,011 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Employees purchased the\n following shares during the periods presented:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (Shares in millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Shares purchased \n | \n \n | \n | 16 | \n\n | \n | \n | 18 | \n\n | \n | \n | 20 | \n\n |
| \n Average price per share \n | \n \n | $ | \n39.87 | \n\n | \n | $ | \n33.60 | \n\n | \n | $ | \n26.81 | \n\n |
| \n | \n \n | \n
\n NOTE 20 —\n ACCUMULATED OTHER COMPREHENSIVE INCOME
\n\n The following table\n summarizes the changes in accumulated other comprehensive income by\n component:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | |||||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Derivatives \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Accumulated other comprehensive\n income balance, beginning of period \n | \n \n | $ | \n31 | \n\n | \n | $ | \n66 | \n\n | \n | $ | \n92 | \n\n |
| \n Unrealized gains, net of tax effects\n of $35, $2 and $54 \n | \n \n | \n | 1,152 | \n\n | \n | \n | 63 | \n\n | \n | \n | 101 | \n\n |
| \n Reclassification adjustments for\n gains included in revenue \n | \n \n | \n | (608 | \n) | \n\n | \n | (104 | \n) | \n\n | \n | (195 | \n) | \n
| \n Tax expense included in provision for\n income taxes \n | \n \n | \n | 15 | \n\n | \n | \n | 6 | \n\n | \n | \n | 68 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Amounts reclassified from accumulated\n other comprehensive income \n | \n \n | \n | (593 | \n) | \n\n | \n | (98 | \n) | \n\n | \n | (127 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net current period other\n comprehensive income (loss) \n | \n \n | \n | 559 | \n\n | \n | \n | (35 | \n) | \n\n | \n | (26 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Accumulated other comprehensive\n income balance, end of period \n | \n \n | $ | \n590 | \n\n | \n | $ | \n31 | \n\n | \n | $ | \n66 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n | \n | \n | \n | |||||||||
| \n Investments \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Accumulated other comprehensive\n income balance, beginning of period \n | \n \n | $ | \n3,531 | \n\n | \n | $ | \n1,794 | \n\n | \n | $ | \n1,431 | \n\n |
| \n Unrealized gains, net of tax effects\n of $59, $1,067 and $244 \n | \n \n | \n | 110 | \n\n | \n | \n | 2,053 | \n\n | \n | \n | 453 | \n\n |
| \n Reclassification adjustments for\n gains included in other income (expense), net \n | \n \n | \n | (728 | \n) | \n\n | \n | (447 | \n) | \n\n | \n | (139 | \n) | \n
| \n Tax expense included in provision for\n income taxes \n | \n \n | \n | 256 | \n\n | \n | \n | 131 | \n\n | \n | \n | 49 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Amounts reclassified from accumulated\n other comprehensive income \n | \n \n | \n | (472 | \n) | \n\n | \n | (316 | \n) | \n\n | \n | (90 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net current period other\n comprehensive income (loss) \n | \n \n | \n | (362 | \n) | \n\n | \n | 1,737 | \n\n | \n | \n | 363 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Accumulated other comprehensive\n income balance, end of period \n | \n \n | $ | \n3,169 | \n\n | \n | $ | \n3,531 | \n\n | \n | $ | \n1,794 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n | \n | \n | \n | |||||||||
| \n Translation Adjustments and\n Other \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Accumulated other comprehensive\n income (loss) balance, beginning of period \n | \n \n | $ | \n146 | \n\n | \n | $ | \n(117 | \n) | \n\n | $ | \n(101 | \n) | \n
| \n Translation adjustments and other,\n net of tax effects of $16, $12 and $(8) \n | \n \n | \n | (1,383 | \n) | \n\n | \n | 263 | \n\n | \n | \n | (16 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Accumulated other comprehensive\n income (loss) balance, end of period \n | \n \n | $ | \n(1,237 | \n) | \n\n | $ | \n146 | \n\n | \n | $ | \n(117 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Accumulated other comprehensive\n income, end of period \n | \n \n | $ | \n2,522 | \n\n | \n | $ | \n3,708 | \n\n | \n | $ | \n1,743 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Debt Investment\n Maturities
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Cost Basis | \n\n | \n | \n \n Estimated \n\n Fair Value \n | \n \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| \n June 30, 2015 \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Due in one year or less \n | \n \n | $ | \n53,616 | \n\n | \n | $ | \n53,645 | \n\n |
| \n Due after one year through five\n years \n | \n \n | \n | 33,260 | \n\n | \n | \n | 33,336 | \n\n |
| \n Due after five years through 10\n years \n | \n \n | \n | 3,180 | \n\n | \n | \n | 3,161 | \n\n |
| \n Due after 10 years \n | \n \n | \n | 1,547 | \n\n | \n | \n | 1,597 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n91,603 | \n\n | \n | $ | \n91,739 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Recent Accounting\n Guidance Not Yet Adopted
\nIn May\n 2014, as part of its ongoing efforts to assist in the convergence\n of U.S. GAAP and International Financial Reporting Standards, the\n Financial Accounting Standards Board (“FASB”) issued a\n new standard related to revenue recognition. Under the new\n standard, recognition of revenue occurs when a customer obtains\n control of promised goods or services in an amount that reflects\n the consideration which the entity expects to receive in exchange\n for those goods or services. In addition, the standard requires\n disclosure of the nature, amount, timing, and uncertainty of\n revenue and cash flows arising from contracts with customers. The\n new standard will be effective for us beginning July 1, 2018,\n and adoption as of the original effective date of July 1, 2017\n is permitted. We anticipate this standard will have a material\n impact on our consolidated financial statements, and we are\n currently evaluating its impact.
\nRevenue\n from external customers, classified by significant product and\n service offerings were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Microsoft Office system \n | \n \n | $ | \n23,538 | \n\n | \n | $ | \n24,323 | \n\n | \n | $ | \n22,995 | \n\n |
| \n Server products and tools \n | \n \n | \n | 18,612 | \n\n | \n | \n | 17,055 | \n\n | \n | \n | 15,408 | \n\n |
| \n Windows PC operating\n system \n | \n \n | \n | 14,826 | \n\n | \n | \n | 16,856 | \n\n | \n | \n | 17,529 | \n\n |
| \n Xbox \n | \n \n | \n | 9,121 | \n\n | \n | \n | 8,643 | \n\n | \n | \n | 7,100 | \n\n |
| \n Phone \n | \n \n | \n | 7,702 | \n\n | \n | \n | 3,073 | \n\n | \n | \n | 615 | \n\n |
| \n Consulting and product support\n services \n | \n \n | \n | 5,090 | \n\n | \n | \n | 4,767 | \n\n | \n | \n | 4,372 | \n\n |
| \n Advertising \n | \n \n | \n | 4,557 | \n\n | \n | \n | 4,016 | \n\n | \n | \n | 3,387 | \n\n |
| \n Surface \n | \n \n | \n | 3,900 | \n\n | \n | \n | 1,883 | \n\n | \n | \n | 853 | \n\n |
| \n Other \n | \n \n | \n | 6,234 | \n\n | \n | \n | 6,217 | \n\n | \n | \n | 5,590 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n93,580 | \n\n | \n | $ | \n86,833 | \n\n | \n | $ | \n77,849 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Our total\n Commercial Cloud revenue was $5.8 billion, $2.8 billion, and $1.3\n billion in fiscal years 2015, 2014, and 2013, respectively. These\n amounts are included in their respective product categories in the\n table above.
\n\n Investments with\n continuous unrealized losses for less than 12 months and 12 months\n or greater and their related fair values were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Less than 12\n Months | \n\n | \n | 12 Months or\n Greater | \n\n | \n | \n | \n | \n | \n Total \n Unrealized \n Losses | \n \n | ||||||||||||
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | |||||||||||
| (In millions) | \n\n | Fair Value | \n\n | \n | Unrealized \n Losses | \n \n | \n | Fair Value | \n\n | \n | Unrealized \n Losses | \n \n | \n | Total \n Fair Value | \n \n | \n | ||||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n June 30, 2015 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n U.S. government and agency\n securities \n | \n \n | $ | \n6,636 | \n\n | \n | $ | \n(9 | \n) | \n\n | $ | \n421 | \n\n | \n | $ | \n(21 | \n) | \n\n | $ | \n7,057 | \n\n | \n | $ | \n(30 | \n) | \n
| \n Foreign government bonds \n | \n \n | \n | 4,611 | \n\n | \n | \n | (12 | \n) | \n\n | \n | 18 | \n\n | \n | \n | (12 | \n) | \n\n | \n | 4,629 | \n\n | \n | \n | (24 | \n) | \n
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 3,171 | \n\n | \n | $ | \n(5 | \n) | \n\n | \n | 28 | \n\n | \n | \n | (1 | \n) | \n\n | \n | 3,199 | \n\n | \n | \n | (6 | \n) | \n
| \n Corporate notes and bonds \n | \n \n | \n | 2,946 | \n\n | \n | \n | (29 | \n) | \n\n | \n | 104 | \n\n | \n | \n | (8 | \n) | \n\n | \n | 3,050 | \n\n | \n | \n | (37 | \n) | \n
| \n Municipal securities \n | \n \n | \n | 36 | \n\n | \n | \n | (1 | \n) | \n\n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 36 | \n\n | \n | \n | (1 | \n) | \n
| \n Common and preferred stock \n | \n \n | \n | 1,389 | \n\n | \n | \n | (180 | \n) | \n\n | \n | 148 | \n\n | \n | \n | (35 | \n) | \n\n | \n | 1,537 | \n\n | \n | \n | (215 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n18,789 | \n\n | \n | $ | \n(236 | \n) | \n\n | $ | \n719 | \n\n | \n | $ | \n(77 | \n) | \n\n | $ | \n19,508 | \n\n | \n | $ | \n(313 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Less than 12\n Months | \n\n | \n | 12 Months or\n Greater | \n\n | \n | \n | \n | \n | \n Total \n Unrealized \n Losses | \n \n | ||||||||||||
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | |||||||||||
| (In millions) | \n\n | Fair Value | \n\n | \n | Unrealized \n Losses | \n \n | \n | Fair Value | \n\n | \n | Unrealized \n Losses | \n \n | \n | Total \n Fair Value | \n \n | \n | ||||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n June 30, 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n U.S. government and agency\n securities \n | \n \n | $ | \n4,161 | \n\n | \n | $ | \n(29 | \n) | \n\n | $ | \n850 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n5,011 | \n\n | \n | $ | \n(29 | \n) | \n
| \n Foreign government bonds \n | \n \n | \n | 566 | \n\n | \n | \n | (4 | \n) | \n\n | \n | 21 | \n\n | \n | \n | (6 | \n) | \n\n | \n | 587 | \n\n | \n | \n | (10 | \n) | \n
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 120 | \n\n | \n | \n | 0 | \n\n | \n | \n | 61 | \n\n | \n | \n | (2 | \n) | \n\n | \n | 181 | \n\n | \n | \n | (2 | \n) | \n
| \n Corporate notes and bonds \n | \n \n | \n | 1,154 | \n\n | \n | \n | (8 | \n) | \n\n | \n | 34 | \n\n | \n | \n | (1 | \n) | \n\n | \n | 1,188 | \n\n | \n | \n | (9 | \n) | \n
| \n Common and preferred stock \n | \n \n | \n | 463 | \n\n | \n | \n | (48 | \n) | \n\n | \n | 257 | \n\n | \n | \n | (33 | \n) | \n\n | \n | 720 | \n\n | \n | \n | (81 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n6,464 | \n\n | \n | $ | \n(89 | \n) | \n\n | $ | \n1,223 | \n\n | \n | $ | \n(42 | \n) | \n\n | $ | \n7,687 | \n\n | \n | $ | \n(131 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n NOTE 21 —\n EMPLOYEE STOCK AND SAVINGS PLANS
\n\n We grant stock-based\n compensation to directors and employees. At June 30, 2015, an\n aggregate of 294 million shares were authorized for future\n grant under our stock plans. Awards that expire or are canceled\n without delivery of shares generally become available for issuance\n under the plans. We issue new shares of Microsoft common stock to\n satisfy exercises and vesting of awards granted under all of our\n stock plans.
\n\n Stock-based compensation\n expense and related income tax benefits were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Stock-based compensation\n expense \n | \n \n | $ | \n2,574 | \n\n | \n | $ | \n2,446 | \n\n | \n | $ | \n2,406 | \n\n |
| \n Income tax benefits related to\n stock-based compensation \n | \n \n | $ | \n868 | \n\n | \n | $ | \n830 | \n\n | \n | $ | \n842 | \n\n |
| \n | \n \n | \n
Stock Plans
\nStock awards
\n\n Stock awards\n (“SAs”) are grants that entitle the holder to shares of\n Microsoft common stock as the award vests. SAs generally vest over\n a four or five-year period.
\n\n
\nExecutive incentive\n plan
\n\n Under the Executive\n Incentive Plan, the Compensation Committee awards SAs to executive\n officers and certain senior executives. The SAs vest ratably in\n August of each of the four years following the grant\n date.
\nActivity for all stock\n plans
\n\n The fair value of each\n award was estimated on the date of grant using the following\n assumptions:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n\n | \n\n | \n|||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Dividends per share (quarterly\n amounts) \n | \n \n | $ | \n0.28 - $ 0.31 | \n\n | \n | $ | \n0.23 - $ 0.28 | \n\n | \n | $ | \n0.20 - $ 0.23 | \n\n |
| \n Interest rates range \n | \n \n | \n | 1.2% - 1.9% | \n\n | \n | \n | 1.3% - 1.8% | \n\n | \n | \n | 0.6% - 1.1% | \n\n |
| \n | \n \n | \n
\n During fiscal year 2015,\n the following activity occurred under our stock plans:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Shares | \n\n | \n | \n \n Weighted \n\n Average \n\n Grant-Date \n\n Fair\n Value \n | \n \n | ||||
| \n | \n \n | \n |||||||
| (In millions) | \n\n | \n | \n | \n | ||||
| \n | \n | \n | ||||||
| \n Stock Awards \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Nonvested balance, beginning of\n year \n | \n \n | \n | 259 | \n\n | \n | $ | \n27.88 | \n\n |
| \n Granted \n | \n \n | \n | 75 | \n\n | \n | $ | \n42.36 | \n\n |
| \n Vested \n | \n \n | \n | (94 | \n) | \n\n | $ | \n27.47 | \n\n |
| \n Forfeited \n | \n \n | \n | (24 | \n) | \n\n | $ | \n31.81 | \n\n |
| \n | \n \n | \n \n | \n | \n | \n | |||
| \n Nonvested balance, end of\n year \n | \n \n | \n | 216 | \n\n | \n | $ | \n32.72 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n |
\n As of June 30, 2015,\n there was approximately $4.7 billion of total unrecognized\n compensation costs related to stock awards. These costs are\n expected to be recognized over a weighted average period of 3\n years.
\n\n During fiscal years 2014\n and 2013, the following activity occurred under our stock\n plans:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions, except fair values) | \n\n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| \n Stock Awards \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Awards\n granted (a) \n | \n \n | \n | 103 | \n\n | \n | \n | 104 | \n\n |
| \n Weighted average grant-date fair\n value \n | \n \n | $ | \n31.50 | \n\n | \n | $ | \n28.37 | \n\n |
| \n | \n \n | \n
\n
\n| (a) | \n\n Awards granted during fiscal year 2014 included four million\n shares in stock replacement awards related to the acquisition of\n NDS. The weighted average grant-date fair value was\n $37.64. \n | \n
\n Total vest-date fair\n value of stock awards vested was $4.2 billion, $3.2 billion, and\n $2.8 billion, for fiscal years 2015, 2014, and 2013,\n respectively.
\n\n
\nEmployee Stock Purchase\n Plan
\n\n We have an employee stock\n purchase plan (the “Plan”) for all eligible employees.\n Shares of our common stock may be purchased by employees at\n three-month intervals at 90% of the fair market value on the last\n trading day of each three-month period. Employees may purchase\n shares having a value not exceeding 15% of their gross compensation\n during an offering period. Employees purchased the following shares\n during the periods presented:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (Shares in millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Shares purchased \n | \n \n | \n | 16 | \n\n | \n | \n | 18 | \n\n | \n | \n | 20 | \n\n |
| \n Average price per share \n | \n \n | $ | \n39.87 | \n\n | \n | $ | \n33.60 | \n\n | \n | $ | \n26.81 | \n\n |
| \n | \n \n | \n
\n At June 30, 2015,\n 157 million shares of our common stock were reserved for\n future issuance through the Plan.
\nSavings Plan
\n\n We have a savings plan in\n the U.S. that qualifies under Section 401(k) of the Internal\n Revenue Code, and a number of savings plans in international\n locations. Participating U.S. employees may contribute up to 75% of\n their salary, but not more than statutory limits. We contribute\n fifty cents for each dollar of the first 6% a participant\n contributes in this plan, with a maximum contribution of the lesser\n of 3% of a participant’s earnings or 3% of the IRS\n compensation limit for the given year. Matching contributions for\n all plans were $454 million, $420 million, and $393 million in\n fiscal years 2015, 2014, and 2013, respectively, and were expensed\n as contributed. Matching contributions in the U.S. plan are\n invested proportionate to each participant’s voluntary\n contributions in the investment options provided under the plan.\n Investment options in the U.S. plan include Microsoft common stock,\n but neither participant nor our matching contributions are required\n to be invested in Microsoft common stock.
\n\n The components of\n intangible assets acquired during the periods presented were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Amount | \n\n | \n | \n \n Weighted \n\n Average Life \n | \n \n | \n | Amount | \n\n | \n | \n \n Weighted \n\n Average Life \n | \n \n | ||||
| \n | \n \n | \n |||||||||||||||
| \n | \n | \n | \n | \n | ||||||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | \n | \n | \n | 2014 | \n\n | \n | \n | \n | ||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n Technology-based \n | \n \n | $ | \n874 | \n\n | \n | \n | 5 years | \n\n | \n | $ | \n2,841 | \n\n | \n | \n | 9 years | \n\n |
| \n Marketing-related \n | \n \n | \n | 543 | \n\n | \n | \n | 8 years | \n\n | \n | \n | 174 | \n\n | \n | \n | 2 years | \n\n |
| \n Contract-based \n | \n \n | \n | 0 | \n\n | \n | \n | \n | \n | \n | \n | 1,500 | \n\n | \n | \n | 9 years | \n\n |
| \n Customer-related \n | \n \n | \n | 37 | \n\n | \n | \n | 4 years | \n\n | \n | \n | 363 | \n\n | \n | \n | 3 years | \n\n |
| \n | \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | |||
| \n Total \n | \n \n | $ | \n1,454 | \n\n | \n | \n | 6 years | \n\n | \n | $ | \n4,878 | \n\n | \n | \n | 8 years | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n |
\n Revenue and cost of\n revenue are generally directly attributed to our segments. Certain\n revenue contracts are allocated among the segments based on the\n relative value of the underlying products and services, which can\n include allocation based on actual prices charged, prices when sold\n separately, or estimated costs plus a profit margin. Cost of\n revenue is directly charged to our hardware segments. For the\n remaining segments, cost of revenue is directly charged in most\n cases and allocated in certain cases, generally using a relative\n revenue methodology.
\n\n We do not allocate\n operating expenses to our segments. Rather, we allocate them to our\n two segment groups, Devices and Consumer and Commercial. Due to the\n integrated structure of our business, allocations of expenses are\n made in certain cases to incent cross-collaboration among our\n segment groups so that a segment group is not solely burdened by\n the cost of a mutually beneficial activity as we seek to deliver\n seamless experiences across devices, whether on-premises or in the\n cloud.
\n\n Operating expenses are\n attributed to our segment groups as follows:
\n\n
\n| \n | • | \n\n | \n Sales\n and marketing expenses are primarily recorded directly to each\n segment group based on identified customer segment. \n | \n
\n
\n| \n | • | \n\n | \n Research and development expenses are primarily shared across\n the segment groups based on relative gross margin but are mapped\n directly in certain cases where the value of the expense only\n accrues to that segment group. \n | \n
\n
\n| \n | • | \n\n | \n General and administrative expenses are primarily allocated\n based on relative gross margin. \n | \n
\n Certain corporate-level\n activity is not allocated to our segment groups, including costs\n of: legal, including expenses, settlements, and fines; information\n technology; human resources; finance; excise taxes; and impairment,\n integration, and restructuring expenses.
\n\n Corporate and Other operating income\n includes adjustments to conform our internal accounting policies to\n U.S. GAAP, corporate-level activity not specifically attributed to\n a segment, and impairment, integration, and restructuring\n expenses. Significant internal accounting policies that differ from\n U.S. GAAP relate to revenue recognition, income statement\n classification, and depreciation.
\n\n Assets are not allocated to segments\n for internal reporting presentations. A portion of amortization and\n depreciation is charged to the respective segment. It is\n impracticable for us to separately identify the amount of\n amortization and depreciation by segment that is included in the\n measure of segment profit or loss.
\n\n NOTE 14 —\n RESTRUCTURING CHARGES
\n \nPhone Hardware\n Integration
\n\n In July 2014, we\n announced a restructuring plan to simplify our organization and\n align NDS with our company’s overall strategy (the\n “Phone Hardware Integration Plan”). Pursuant to the\n Phone Hardware Integration Plan, we eliminated approximately 19,000\n positions in fiscal year 2015, including approximately 13,000\n professional and factory positions related to the NDS business. The\n actions associated with the Phone Hardware Integration Plan were\n completed as of June 30, 2015.
\n\n
\n\n In connection with the\n Phone Hardware Integration Plan, we incurred restructuring charges\n of $1.3 billion during fiscal year 2015, including severance\n expenses and other reorganization costs, primarily associated with\n our facilities consolidation and write-downs of certain\n assets.
\nPhone Hardware\n Restructuring
\n\n In June 2015, management\n approved a plan to restructure our Phone Hardware business to\n better focus and align resources (the “Phone Hardware\n Restructuring Plan”), under which we will eliminate up to\n 7,800 positions in fiscal year 2016. In connection with the Phone\n Hardware Restructuring Plan, we recorded restructuring charges of\n $780 million during fiscal year 2015, including severance expenses\n and other reorganization costs, primarily related to contractual\n obligations. The actions associated with the Phone Hardware\n Restructuring Plan are expected to be completed as of June 30,\n 2016.
\n\n Restructuring charges\n associated with each plan were included in impairment, integration,\n and restructuring expenses in our consolidated income statement,\n and reflected in Corporate and Other in our table of operating\n income (loss) by segment group in Note 22 — Segment\n Information and Geographic Data.
\n\n Changes in the\n restructuring liability were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Severance | \n\n | \n | \n \n Asset \n\n Impairments \n\n and Other (a) \n | \n \n | \n | Total | \n\n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| \n Restructuring liability as of\n June 30, 2014 \n | \n \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n |
| \n Restructuring charges \n | \n \n | \n | 1,308 | \n\n | \n | \n | 770 | \n\n | \n | \n | 2,078 | \n\n |
| \n Cash paid \n | \n \n | \n | (701 | \n) | \n\n | \n | (134 | \n) | \n\n | \n | (835 | \n) | \n
| \n Other \n | \n \n | \n | (19 | \n) | \n\n | \n | (387 | \n) | \n\n | \n | (406 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Restructuring liability as of\n June 30, 2015 \n | \n \n | $ | \n588 | \n\n | \n | $ | \n249 | \n\n | \n | $ | \n837 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n “Asset Impairments and Other” primarily reflects\n activities associated with the consolidation of our facilities and\n manufacturing operations, including asset write-downs of $372\n million during fiscal year 2015, as well as contract termination\n costs. \n | \n
Intangible Assets
\n\n All of our intangible\n assets are subject to amortization and are amortized using the\n straight-line method over their estimated period of benefit,\n ranging from one to 15 years. We evaluate the recoverability of\n intangible assets periodically by taking into account events or\n circumstances that may warrant revised estimates of useful lives or\n that indicate the asset may be impaired.
\n\n NOTE 4 —\n INVESTMENTS
\nInvestment\n Components
\n\n The components of\n investments, including associated derivatives, but excluding\n held-to-maturity investments, were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Cost Basis | \n\n | \n | \n \n Unrealized \n\n Gains \n | \n \n | \n | \n \n Unrealized \n\n Losses \n | \n \n | \n | \n \n Recorded \n\n Basis \n | \n \n | \n | \n \n Cash \n\n and\n Cash \n\n Equivalents \n | \n \n | \n | \n \n Short-term \n\n Investments \n | \n \n | \n | \n \n Equity \n\n and\n Other \n\n Investments \n | \n \n | |||||||
| \n | \n \n | \n |||||||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | |||||||||||||||||||||
| \n June 30, 2015 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | |||||||||||||||||||||
| \n Cash \n | \n \n | $ | \n3,679 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n3,679 | \n\n | \n | $ | \n3,679 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n |
| \n Mutual funds \n | \n \n | \n | 1,100 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,100 | \n\n | \n | \n | 1,100 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Commercial paper \n | \n \n | \n | 1 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1 | \n\n | \n | \n | 1 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Certificates of deposit \n | \n \n | \n | 906 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 906 | \n\n | \n | \n | 776 | \n\n | \n | \n | 130 | \n\n | \n | \n | 0 | \n\n |
| \n U.S. government and\n agency securities \n | \n \n | \n | 72,843 | \n\n | \n | \n | 76 | \n\n | \n | \n | (30 | \n) | \n\n | \n | 72,889 | \n\n | \n | \n | 39 | \n\n | \n | \n | 72,850 | \n\n | \n | \n | 0 | \n\n |
| \n Foreign government bonds \n | \n \n | \n | 5,477 | \n\n | \n | \n | 3 | \n\n | \n | \n | (24 | \n) | \n\n | \n | 5,456 | \n\n | \n | \n | 0 | \n\n | \n | \n | 5,456 | \n\n | \n | \n | 0 | \n\n |
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 4,899 | \n\n | \n | \n | 23 | \n\n | \n | \n | (6 | \n) | \n\n | \n | 4,916 | \n\n | \n | \n | 0 | \n\n | \n | \n | 4,916 | \n\n | \n | \n | 0 | \n\n |
| \n Corporate notes and bonds \n | \n \n | \n | 7,192 | \n\n | \n | \n | 97 | \n\n | \n | \n | (37 | \n) | \n\n | \n | 7,252 | \n\n | \n | \n | 0 | \n\n | \n | \n | 7,252 | \n\n | \n | \n | 0 | \n\n |
| \n Municipal securities \n | \n \n | \n | 285 | \n\n | \n | \n | 35 | \n\n | \n | \n | (1 | \n) | \n\n | \n | 319 | \n\n | \n | \n | 0 | \n\n | \n | \n | 319 | \n\n | \n | \n | 0 | \n\n |
| \n Common and preferred stock \n | \n \n | \n | 6,668 | \n\n | \n | \n | 4,986 | \n\n | \n | \n | (215 | \n) | \n\n | \n | 11,439 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,439 | \n\n |
| \n Other investments \n | \n \n | \n | 597 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 597 | \n\n | \n | \n | 0 | \n\n | \n | \n | 8 | \n\n | \n | \n | 589 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n103,647 | \n\n | \n | $ | \n5,220 | \n\n | \n | $ | \n(313 | \n) | \n\n | $ | \n108,554 | \n\n | \n | $ | \n5,595 | \n\n | \n | $ | \n90,931 | \n\n | \n | $ | \n12,028 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Cost Basis | \n\n | \n | \n \n Unrealized \n\n Gains \n | \n \n | \n | \n \n Unrealized \n\n Losses \n | \n \n | \n | \n \n Recorded \n\n Basis \n | \n \n | \n | \n \n Cash \n\n and\n Cash \n\n Equivalents \n | \n \n | \n | \n \n Short-term \n\n Investments \n | \n \n | \n | \n \n Equity \n\n and\n Other \n\n Investments \n | \n \n | |||||||
| \n | \n \n | \n |||||||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | |||||||||||||||||||||
| \n June 30, 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | |||||||||||||||||||||
| \n Cash \n | \n \n | $ | \n4,980 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n4,980 | \n\n | \n | $ | \n4,980 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n |
| \n Mutual funds \n | \n \n | \n | 590 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 590 | \n\n | \n | \n | 590 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Commercial paper \n | \n \n | \n | 189 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 189 | \n\n | \n | \n | 89 | \n\n | \n | \n | 100 | \n\n | \n | \n | 0 | \n\n |
| \n Certificates of deposit \n | \n \n | \n | 1,197 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,197 | \n\n | \n | \n | 865 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n |
| \n U.S. government and\n agency securities \n | \n \n | \n | 66,952 | \n\n | \n | \n | 103 | \n\n | \n | \n | (29 | \n) | \n\n | \n | 67,026 | \n\n | \n | \n | 109 | \n\n | \n | \n | 66,917 | \n\n | \n | \n | 0 | \n\n |
| \n Foreign government bonds \n | \n \n | \n | 3,328 | \n\n | \n | \n | 17 | \n\n | \n | \n | (10 | \n) | \n\n | \n | 3,335 | \n\n | \n | \n | 2,027 | \n\n | \n | \n | 1,308 | \n\n | \n | \n | 0 | \n\n |
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 991 | \n\n | \n | \n | 30 | \n\n | \n | \n | (2 | \n) | \n\n | \n | 1,019 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,019 | \n\n | \n | \n | 0 | \n\n |
| \n Corporate notes and bonds \n | \n \n | \n | 6,845 | \n\n | \n | \n | 191 | \n\n | \n | \n | (9 | \n) | \n\n | \n | 7,027 | \n\n | \n | \n | 9 | \n\n | \n | \n | 7,018 | \n\n | \n | \n | 0 | \n\n |
| \n Municipal securities \n | \n \n | \n | 287 | \n\n | \n | \n | 45 | \n\n | \n | \n | 0 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n |
| \n Common and preferred stock \n | \n \n | \n | 6,785 | \n\n | \n | \n | 5,207 | \n\n | \n | \n | (81 | \n) | \n\n | \n | 11,911 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,911 | \n\n |
| \n Other investments \n | \n \n | \n | 1,164 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,164 | \n\n | \n | \n | 0 | \n\n | \n | \n | 14 | \n\n | \n | \n | 1,150 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n93,308 | \n\n | \n | $ | \n5,593 | \n\n | \n | $ | \n(131 | \n) | \n\n | $ | \n98,770 | \n\n | \n | $ | \n8,669 | \n\n | \n | $ | \n77,040 | \n\n | \n | $ | \n13,061 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n In addition to the\n investments in the table above, we also own corporate notes that\n are classified as held-to-maturity investments, which are included\n in equity and other investments on the balance sheet. These\n corporate notes are due October 31, 2023 and are measured at\n fair value on a nonrecurring basis. As of June 30, 2015, the\n amortized cost and recorded basis of these corporate notes were\n both $25 million with an estimated fair value that approximates the\n carrying value. As of June 30, 2014, the amortized cost,\n recorded basis, and estimated fair value of these corporate notes\n was $1.5 billion, $1.5 billion, and $1.7 billion, respectively,\n while their associated gross unrealized holding gains were $164\n million.
\n\n As of June 30, 2015\n and 2014, the recorded bases of common and preferred stock that are\n restricted for more than one year or are not publicly traded were\n $561 million and $520 million, respectively. These investments are\n carried at cost and are reviewed quarterly for indicators of\n other-than-temporary impairment. It is not practicable for us to\n reliably estimate the fair value of these investments.
\n\n We lend certain\n fixed-income and equity securities to increase investment returns.\n These transactions are accounted for as secured borrowings and the\n loaned securities continue to be carried as investments on our\n balance sheet. Cash and/or security interests are received as\n collateral for the loaned securities with the amount determined\n based upon the underlying security lent and the creditworthiness of\n the borrower. As of June 30, 2015, collateral received under these\n agreements totaled $92 million which is comprised of $79 million of\n certificates of deposit and $13 million of U.S. government and\n agency securities. The contractual maturities of these agreements\n are primarily on a continuous and overnight basis.
\n\n
\nUnrealized Losses on\n Investments
\n\n Investments with\n continuous unrealized losses for less than 12 months and 12 months\n or greater and their related fair values were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Less than 12\n Months | \n\n | \n | 12 Months or\n Greater | \n\n | \n | \n | \n | \n | \n Total \n Unrealized \n Losses | \n \n | ||||||||||||
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | |||||||||||
| (In millions) | \n\n | Fair Value | \n\n | \n | Unrealized \n Losses | \n \n | \n | Fair Value | \n\n | \n | Unrealized \n Losses | \n \n | \n | Total \n Fair Value | \n \n | \n | ||||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n June 30, 2015 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n U.S. government and agency\n securities \n | \n \n | $ | \n6,636 | \n\n | \n | $ | \n(9 | \n) | \n\n | $ | \n421 | \n\n | \n | $ | \n(21 | \n) | \n\n | $ | \n7,057 | \n\n | \n | $ | \n(30 | \n) | \n
| \n Foreign government bonds \n | \n \n | \n | 4,611 | \n\n | \n | \n | (12 | \n) | \n\n | \n | 18 | \n\n | \n | \n | (12 | \n) | \n\n | \n | 4,629 | \n\n | \n | \n | (24 | \n) | \n
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 3,171 | \n\n | \n | $ | \n(5 | \n) | \n\n | \n | 28 | \n\n | \n | \n | (1 | \n) | \n\n | \n | 3,199 | \n\n | \n | \n | (6 | \n) | \n
| \n Corporate notes and bonds \n | \n \n | \n | 2,946 | \n\n | \n | \n | (29 | \n) | \n\n | \n | 104 | \n\n | \n | \n | (8 | \n) | \n\n | \n | 3,050 | \n\n | \n | \n | (37 | \n) | \n
| \n Municipal securities \n | \n \n | \n | 36 | \n\n | \n | \n | (1 | \n) | \n\n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 36 | \n\n | \n | \n | (1 | \n) | \n
| \n Common and preferred stock \n | \n \n | \n | 1,389 | \n\n | \n | \n | (180 | \n) | \n\n | \n | 148 | \n\n | \n | \n | (35 | \n) | \n\n | \n | 1,537 | \n\n | \n | \n | (215 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n18,789 | \n\n | \n | $ | \n(236 | \n) | \n\n | $ | \n719 | \n\n | \n | $ | \n(77 | \n) | \n\n | $ | \n19,508 | \n\n | \n | $ | \n(313 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Less than 12\n Months | \n\n | \n | 12 Months or\n Greater | \n\n | \n | \n | \n | \n | \n Total \n Unrealized \n Losses | \n \n | ||||||||||||
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n | \n | \n | |||||||||||
| (In millions) | \n\n | Fair Value | \n\n | \n | Unrealized \n Losses | \n \n | \n | Fair Value | \n\n | \n | Unrealized \n Losses | \n \n | \n | Total \n Fair Value | \n \n | \n | ||||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n June 30, 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n U.S. government and agency\n securities \n | \n \n | $ | \n4,161 | \n\n | \n | $ | \n(29 | \n) | \n\n | $ | \n850 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n5,011 | \n\n | \n | $ | \n(29 | \n) | \n
| \n Foreign government bonds \n | \n \n | \n | 566 | \n\n | \n | \n | (4 | \n) | \n\n | \n | 21 | \n\n | \n | \n | (6 | \n) | \n\n | \n | 587 | \n\n | \n | \n | (10 | \n) | \n
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 120 | \n\n | \n | \n | 0 | \n\n | \n | \n | 61 | \n\n | \n | \n | (2 | \n) | \n\n | \n | 181 | \n\n | \n | \n | (2 | \n) | \n
| \n Corporate notes and bonds \n | \n \n | \n | 1,154 | \n\n | \n | \n | (8 | \n) | \n\n | \n | 34 | \n\n | \n | \n | (1 | \n) | \n\n | \n | 1,188 | \n\n | \n | \n | (9 | \n) | \n
| \n Common and preferred stock \n | \n \n | \n | 463 | \n\n | \n | \n | (48 | \n) | \n\n | \n | 257 | \n\n | \n | \n | (33 | \n) | \n\n | \n | 720 | \n\n | \n | \n | (81 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n6,464 | \n\n | \n | $ | \n(89 | \n) | \n\n | $ | \n1,223 | \n\n | \n | $ | \n(42 | \n) | \n\n | $ | \n7,687 | \n\n | \n | $ | \n(131 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Unrealized losses from\n fixed-income securities are primarily attributable to changes in\n interest rates. Unrealized losses from domestic and international\n equities are due to market price movements. Management does not\n believe any remaining unrealized losses represent\n other-than-temporary impairments based on our evaluation of\n available evidence as of June 30, 2015.
\nDebt Investment\n Maturities
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Cost Basis | \n\n | \n | \n \n Estimated \n\n Fair Value \n | \n \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| \n June 30, 2015 \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Due in one year or less \n | \n \n | $ | \n53,616 | \n\n | \n | $ | \n53,645 | \n\n |
| \n Due after one year through five\n years \n | \n \n | \n | 33,260 | \n\n | \n | \n | 33,336 | \n\n |
| \n Due after five years through 10\n years \n | \n \n | \n | 3,180 | \n\n | \n | \n | 3,161 | \n\n |
| \n Due after 10 years \n | \n \n | \n | 1,547 | \n\n | \n | \n | 1,597 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n91,603 | \n\n | \n | $ | \n91,739 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n
\n NOTE 18 —\n CONTINGENCIES
\n \nPatent and Intellectual Property\n Claims
\nMotorola litigation
\n\n In October 2010,\n Microsoft filed patent infringement complaints against Motorola\n Mobility (“Motorola”) with the International Trade\n Commission (“ITC”) and in U.S. District Court in\n Seattle for infringement of nine Microsoft patents by\n Motorola’s Android devices. Microsoft and Motorola have filed\n additional claims against each other with the ITC, in federal\n district courts in Seattle, Wisconsin, Florida, and California, and\n in courts in Germany. The nature of the claims asserted and status\n of individual matters are summarized below.
\nInternational Trade\n Commission
\n\n In 2012, the ITC issued a\n limited exclusion order against Motorola on one Microsoft patent,\n which was affirmed on appeal. In 2013, Microsoft filed an action in\n U.S. District Court in Washington, D.C. seeking an order to compel\n enforcement of the ITC’s 2012 import ban against infringing\n Motorola products by the Bureau of Customs and Border Protection\n (“CBP”), after learning that CBP had failed to fully\n enforce the order.
\n\n In 2010, Motorola filed\n an action against Microsoft with the ITC alleging infringement of\n five Motorola patents by Xbox consoles and accessories and seeking\n an exclusion order to prohibit importation of the allegedly\n infringing Xbox products. At Motorola’s request, the ITC\n terminated its investigation of four Motorola patents. In 2013, the\n ITC affirmed there was no violation of the remaining Motorola\n patent. Motorola appealed the ITC’s decision to the U.S.\n Court of Appeals for the Federal Circuit.
\nU.S. District Court
\n\n The Seattle District\n Court case filed in October 2010 by Microsoft as a companion to\n Microsoft’s ITC case against Motorola was stayed pending the\n outcome of the ITC case.
\n\n In November 2010,\n Microsoft sued Motorola for breach of contract in U.S. District\n Court in Seattle, alleging that Motorola breached its commitments\n to standards-setting organizations to license to Microsoft certain\n patents on reasonable and non-discriminatory (“RAND”)\n terms and conditions. Motorola has declared these patents essential\n to the implementation of the H.264 video standard and the 802.11\n Wi-Fi standard. In the Motorola ITC case described above and in\n suits described below, Motorola or a Motorola affiliate\n subsequently sued Microsoft on those patents in U.S. District\n Courts, in the ITC, and in Germany. In 2012, the Seattle District\n Court granted a partial summary judgment in favor of Microsoft\n ruling that (1) Motorola had committed to standards\n organizations to license its declared-essential patents on RAND\n terms and conditions; and (2) Microsoft is a third-party\n beneficiary of those commitments. After trial, the Seattle District\n Court set per unit royalties for Motorola’s H.264 and 802.11\n patents, which resulted in an immaterial Microsoft liability. In\n 2013, following trial of Microsoft’s breach of contract\n claim, a jury awarded $14.5 million in damages to Microsoft.\n Motorola appealed with respect to both the Court’s\n determination of royalties due Motorola and the jury’s award\n of damages against Motorola; in July 2015 the U.S. Court of Appeals\n for the Ninth Circuit affirmed the trial court’s judgment in\n all respects.
\n\n Cases filed by Motorola\n in Wisconsin, California, and Florida, with the exception of one\n case in Wisconsin initially stayed and later dismissed without\n prejudice (a companion case to Motorola’s ITC action), have\n been transferred to the U.S District Court in Seattle. Motorola and\n Microsoft both seek damages as well as injunctive relief. The court\n has stayed these cases in Seattle on agreement of the\n parties.
\n\n
\n| \n | • | \n\n | \n In the\n transferred cases, Motorola asserts 15 patents are infringed by a\n range of Microsoft products including mobile and PC operating\n system, productivity, server, communication, browser and gaming\n products. \n | \n
\n
\n| \n | • | \n\n | \n In the\n Motorola action originally filed in California, Motorola asserts\n Microsoft violated antitrust laws in connection with\n Microsoft’s assertion of patents against Motorola that\n Microsoft agreed to license to certain qualifying entities on RAND\n terms and conditions. \n | \n
\n
\n| \n | • | \n\n | \n In\n counterclaims, Microsoft asserts 14 patents are infringed by\n Motorola Android devices and certain Motorola digital video\n recorders. \n | \n
Germany
\n\n In 2011, Motorola filed\n patent infringement actions in Germany against Microsoft and\n several Microsoft subsidiaries.
\n\n
\n| \n | • | \n\n | \n Motorola asserts two patents (both now expired) are essential\n to implementation of the H.264 video standard, and Motorola alleges\n that H.264 capable products including Xbox 360, Windows 7, Media\n Player, and Internet Explorer infringe those patents. In 2012, the\n court issued an injunction relating to all H.264 capable Microsoft\n products in Germany, which Microsoft appealed. Orders in the\n litigation pending in Seattle, Washington described above enjoin\n Motorola from enforcing the German injunction. \n | \n
\n
\n| \n | • | \n\n | \n Motorola asserts that one patent covers certain syncing\n functionality in the ActiveSync protocol employed by Windows Phone\n 7, Outlook Mobile, Hotmail Mobile, Exchange Online, Exchange\n Server, and Hotmail Server. In 2013, the court stayed the case\n pending the outcome of parallel proceedings in which Microsoft is\n seeking to invalidate the patent. In 2013, the Federal Patent Court\n invalidated the originally issued patent claims, but ruled that\n certain new amended claims were patentable. Both Motorola and\n Microsoft appealed. In June 2014, the court reopened infringement\n proceedings, which are currently stayed. \n | \n
\n
\n| \n | • | \n\n | \n Microsoft may be able to mitigate the adverse impact of any\n injunction by altering its products to avoid Motorola’s\n infringement claims. \n | \n
\n
\n| \n | • | \n\n | \n Any\n damages would be determined in separate proceedings. \n | \n
\n
\n\n In lawsuits Microsoft\n filed in Germany in 2011 and 2012, Microsoft asserts that Motorola\n Android devices infringe Microsoft patents and is seeking damages\n and injunctions. In 2012, regional courts in Germany issued\n injunctions on three of the Microsoft patents, which Motorola\n appealed. One judgment has been affirmed on appeal (and Motorola\n has further appealed), and the other two appeals are pending (in\n one of these two cases the asserted patent has expired). An\n additional infringement proceeding is still pending in the court of\n first instance. In actions filed separately by Motorola to\n invalidate these patents, the Federal Patent Court in 2013 and 2014\n held the Microsoft patents invalid, and Microsoft appealed. For the\n cases in which Microsoft obtained injunctions, if Motorola were to\n prevail following all appeals, Motorola could have a claim against\n Microsoft for damages caused by an erroneously granted\n injunction.
\nIPCom patent\n litigation
\n\n IPCom GmbH & Co.\n (“IPCom”) is a German company that holds a large\n portfolio of mobile technology-related patents spanning about 170\n patent families and addressing a broad range of cellular\n technologies. IPCom has asserted 19 of these patents in litigation\n against Nokia and many of the leading cell phone companies and\n operators. In November 2014, Microsoft and IPCom entered into a\n standstill agreement staying all of the pending litigation against\n Microsoft to permit the parties to pursue settlement\n discussions.
\nInterDigital patent\n litigation
\n\n InterDigital Technology\n Corporation and InterDigital Communications Corporation\n (collectively, “IDT”) filed four patent infringement\n cases against Nokia in the ITC and in U.S. District Court for the\n District of Delaware between 2007 and 2013. We have been added to\n these cases as a defendant. IDT has cases pending against other\n defendants based on the same patents because most of the patents at\n issue allegedly relate to 3G and 4G wireless communications\n standards essential functionality. The cases involving us include\n three ITC investigations where IDT is seeking an order excluding\n importation of 3G and 4G phones into the U.S. and one active case\n in U.S. District Court in Delaware seeking an injunction and\n damages. The ITC issued a finding of no violation relating to two\n of the investigations, which IDT appealed. In February 2015, the\n U.S. Court of Appeals for the Federal Circuit affirmed one of the\n ITC’s findings; the other has been stayed. In the third ITC\n action the administrative law judge (“ALJ”) issued a\n determination finding: (1) infringement; (2) evidence of\n “reverse hold-up;” and (3) the public interest\n does not preclude issuance of an exclusion order. The ITC is\n reviewing the ALJ’s initial determination. The trial in the\n Delaware case is scheduled for November 2015.
\nEuropean copyright\n levies
\n\n We assumed from Nokia all\n potential liability due to Nokia’s alleged failure to pay\n “private copying levies” in various European countries\n based upon sale of memory cards and mobile phones that incorporate\n blank memory. The levies are based upon a 2001 European Union\n (“EU”) Directive establishing a right for end users to\n make copies of copyrighted works for personal or private use, but\n also allowing the collection of levies based upon sales of blank\n media or recording devices to compensate copyright holders for\n private copying. Various collecting societies in EU countries\n initiated litigation against Nokia, stating that Nokia must pay\n levies not only based upon sales of blank memory cards, but also\n phones that include blank memory for data storage on the phones,\n regardless of actual usage of that memory. The most\n significant cases against Nokia are pending in Germany and Austria,\n due to both the high volume of sales and high levy amounts sought\n in these countries. Since April 2015, we and other major\n manufacturers have been engaged in settlement negotiations with the\n German collecting society, with the aim of concluding negotiations\n by October 2015.
\nOther patent and intellectual\n property claims
\n\n In addition to these\n cases, there are approximately 70 other patent infringement cases\n pending against Microsoft.
\n\n
\nAntitrust, Unfair Competition, and\n Overcharge Class Actions
\n\n A large number of\n antitrust and unfair competition class action lawsuits were filed\n against us in various state, federal, and Canadian courts on behalf\n of various classes of direct and indirect purchasers of our PC\n operating system and certain other software products between 1999\n and 2005.
\n\n We obtained dismissals or\n reached settlements of all claims made in the U.S. Under the\n settlements, generally class members can obtain vouchers that\n entitle them to be reimbursed for purchases of a wide variety of\n platform-neutral computer hardware and software. The total value of\n vouchers that we may issue varies by state. We will make available\n to certain schools a percentage of those vouchers that are not\n issued or claimed (one-half to two-thirds depending on the state).\n The total value of vouchers we ultimately issue will depend on the\n number of class members who make claims and are issued vouchers. We\n estimate the total remaining cost of the settlements is\n approximately $200 million, all of which had been accrued as of\n June 30, 2015.
\n\n Three similar cases\n pending in British Columbia, Ontario, and Quebec, Canada have not\n been settled. In 2010, the court in the British Columbia case\n certified it as a class action. After the British Columbia Court of\n Appeal dismissed the case, in 2013 the Canadian Supreme Court\n reversed the appellate court and reinstated part of the British\n Columbia case, which is now scheduled for trial in 2016. The other\n two cases are inactive.
\nOther Antitrust Litigation and\n Claims
\nGO Computer\n litigation
\n\n In June 2005, GO Computer\n Inc. and co-founder Jerry Kaplan filed a complaint in California\n state court asserting antitrust claims under the Cartwright Act\n related to the business of the former GO Corporation in the early\n 1990s and its successor in interest, Lucent Corporation in the\n early 2000s. All claims prior to June 2001 have been dismissed with\n prejudice as barred by the statute of limitations. The case is\n moving forward with discovery, and a trial is set for September\n 2015.
\nChina State Administration for\n Industry and Commerce investigation
\n\n In July 2014, Microsoft\n was informed that China’s State Administration for Industry\n and Commerce (“SAIC”) had begun a formal investigation\n relating to China’s Anti-Monopoly Law, and the SAIC conducted\n onsite inspections of Microsoft offices in Beijing, Shanghai,\n Guangzhou, and Chengdu. SAIC has stated the investigation\n relates to compatibility, bundle sales, and file verification\n issues related to Windows and Office software.
\nProduct-Related\n Litigation
\nU.S. cell phone\n litigation
\n\n Nokia, along with other\n handset manufacturers and network operators, is a defendant in 19\n lawsuits filed in the Superior Court for the District of Columbia\n by individual plaintiffs who allege that radio emissions from\n cellular handsets caused their brain tumors and other adverse\n health effects. We have assumed responsibility for these claims as\n part of the NDS acquisition and have been substituted for the Nokia\n defendants. Nine of these cases were filed in 2002 and are\n consolidated for certain pre-trial proceedings; the remaining 10\n cases are stayed. In a separate 2009 decision, the Court of Appeals\n for the District of Columbia held that adverse health effect claims\n arising from the use of cellular handsets that operate within the\n U.S. Federal Communications Commission radio frequency emission\n guidelines (“FCC Guidelines”) are pre-empted by federal\n law. The plaintiffs allege that their handsets either operated\n outside the FCC Guidelines or were manufactured before the FCC\n Guidelines went into effect. The lawsuits also allege an\n industry-wide conspiracy to manipulate the science and testing\n around emission guidelines.
\n\n In September 2013,\n defendants in the consolidated cases moved to exclude\n plaintiffs’ expert evidence of general causation on the basis\n of flawed scientific methodologies. In March 2014, defendants filed\n a separate motion to preclude plaintiffs’ general causation\n testimony. In August 2014, the court granted in part\n defendants’ motion to exclude plaintiffs’ general\n causation experts. The plaintiffs filed an interlocutory appeal. In\n December 2014, the District of Columbia Court of Appeals agreed to\n hear en banc defendants’ interlocutory appeal\n challenging the standard for evaluating expert scientific evidence.\n Trial court proceedings are stayed pending resolution of the\n appeal.
\nCanadian cell phone class\n action
\n\n Nokia, along with other\n handset manufacturers and network operators, is a defendant in a\n 2013 class action lawsuit filed in the Supreme Court of British\n Columbia by a purported class of Canadians who have used cellular\n phones for at least 1,600 hours, including a subclass of users with\n brain tumors. Microsoft was served with the complaint in June 2014\n and has been substituted for the Nokia defendants. The litigation\n is not yet active as several defendants remain to be\n served.
\nOther
\n\n We also are subject to a\n variety of other claims and suits that arise from time to time in\n the ordinary course of our business. Although management currently\n believes that resolving claims against us, individually or in\n aggregate, will not have a material adverse impact on our\n consolidated financial statements, these matters are subject to\n inherent uncertainties and management’s view of these matters\n may change in the future.
\n\n As of June 30, 2015,\n we accrued aggregate legal liabilities of $614 million in other\n current liabilities and $20 million in other long-term liabilities.\n While we intend to defend these matters vigorously, adverse\n outcomes that we estimate could reach approximately $1.6 billion in\n aggregate beyond recorded amounts are reasonably possible. Were\n unfavorable final outcomes to occur, there exists the possibility\n of a material adverse impact on our consolidated financial\n statements for the period in which the effects become reasonably\n estimable.
\n\n NOTE 13 — INCOME\n TAXES
\n \n\n The components of the\n provision for income taxes were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Current Taxes \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n U.S. federal \n | \n \n | $ | \n3,661 | \n\n | \n | $ | \n3,738 | \n\n | \n | $ | \n3,131 | \n\n |
| \n U.S. state and local \n | \n \n | \n | 364 | \n\n | \n | \n | 266 | \n\n | \n | \n | 332 | \n\n |
| \n Foreign \n | \n \n | \n | 2,065 | \n\n | \n | \n | 2,073 | \n\n | \n | \n | 1,745 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Current taxes \n | \n \n | \n | 6,090 | \n\n | \n | \n | 6,077 | \n\n | \n | \n | 5,208 | \n\n |
| \n | \n | \n | \n | |||||||||
| \n Deferred Taxes \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Deferred taxes \n | \n \n | \n | 224 | \n\n | \n | \n | (331 | \n) | \n\n | \n | (19 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Provision for income taxes \n | \n \n | $ | \n6,314 | \n\n | \n | $ | \n5,746 | \n\n | \n | $ | \n5,189 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n U.S. and foreign\n components of income before income taxes were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||||||||||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n U.S. \n | \n \n | $ | \n7,363 | \n\n | \n | $ | \n7,127 | \n\n | \n | $ | \n6,674 | \n\n |
| \n Foreign \n | \n \n | \n | 11,144 | \n\n | \n | \n | 20,693 | \n\n | \n | \n | 20,378 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Income before income taxes \n | \n \n | $ | \n18,507 | \n\n | \n | $ | \n27,820 | \n\n | \n | $ | \n27,052 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n The items accounting for\n the difference between income taxes computed at the U.S. federal\n statutory rate and our effective rate were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Federal statutory rate \n | \n \n | \n | 35.0% | \n\n | \n | \n | 35.0% | \n\n | \n | \n | 35.0% | \n\n |
| \n Effect of: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Foreign earnings taxed at lower\n rates \n | \n \n | \n | (20.9)% | \n\n | \n | \n | (17.1)% | \n\n | \n | \n | (17.5)% | \n\n |
| \n Phone Hardware nondeductible charges\n and valuation allowance \n | \n \n | \n | 19.1% | \n\n | \n | \n | 0.9% | \n\n | \n | \n | 0% | \n\n |
| \n Domestic production activities\n deduction \n | \n \n | \n | (2.4)% | \n\n | \n | \n | (1.0)% | \n\n | \n | \n | (1.2)% | \n\n |
| \n Other reconciling items,\n net \n | \n \n | \n | 3.3% | \n\n | \n | \n | 2.9% | \n\n | \n | \n | 2.9% | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Effective rate \n | \n \n | \n | 34.1% | \n\n | \n | \n | 20.7% | \n\n | \n | \n | 19.2% | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n\n The reduction from the\n federal statutory rate is primarily due to foreign earnings taxed\n at lower rates resulting from producing and distributing our\n products and services through our foreign regional operations\n centers in Ireland, Singapore, and Puerto Rico. In fiscal year\n 2015, this reduction was mostly offset by losses in foreign\n jurisdictions for which we may not realize a tax benefit, primarily\n as a result of impairment and restructuring charges. Excluding\n these losses, our foreign earnings, which are taxed at rates lower\n than the U.S. rate and are generated from our regional operating\n centers, were 73%, 81%, and 79% of our foreign income before tax in\n fiscal years 2015, 2014, and 2013, respectively. In general, other\n reconciling items consist of interest, U.S. state income taxes, and\n credits. In fiscal years 2015, 2014, and 2013, there were no\n individually significant other reconciling items.
\n\n The components of the\n deferred income tax assets and liabilities were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Deferred Income Tax\n Assets \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Stock-based compensation\n expense \n | \n \n | $ | \n884 | \n\n | \n | $ | \n903 | \n\n |
| \n Other expense items \n | \n \n | \n | 1,531 | \n\n | \n | \n | 1,112 | \n\n |
| \n Restructuring charges \n | \n \n | \n | 211 | \n\n | \n | \n | 0 | \n\n |
| \n Unearned revenue \n | \n \n | \n | 520 | \n\n | \n | \n | 520 | \n\n |
| \n Impaired investments \n | \n \n | \n | 257 | \n\n | \n | \n | 272 | \n\n |
| \n Loss carryforwards \n | \n \n | \n | 1,158 | \n\n | \n | \n | 922 | \n\n |
| \n Depreciation and\n amortization \n | \n \n | \n | 798 | \n\n | \n | \n | 0 | \n\n |
| \n Other revenue items \n | \n \n | \n | 56 | \n\n | \n | \n | 64 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Deferred income tax assets \n | \n \n | \n | 5,415 | \n\n | \n | \n | 3,793 | \n\n |
| \n Less valuation allowance \n | \n \n | \n | (2,265 | \n) | \n\n | \n | (903 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Deferred income tax assets, net of\n valuation allowance \n | \n \n | $ | \n3,150 | \n\n | \n | $ | \n2,890 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n | \n | \n | ||||||
| \n Deferred Income Tax\n Liabilities \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Foreign earnings \n | \n \n | $ | \n(1,280 | \n) | \n\n | $ | \n(1,140 | \n) | \n
| \n Unrealized gain on investments and\n debt \n | \n \n | \n | (2,223 | \n) | \n\n | \n | (1,974 | \n) | \n
| \n Depreciation and\n amortization \n | \n \n | \n | (685 | \n) | \n\n | \n | (470 | \n) | \n
| \n Other \n | \n \n | \n | (29 | \n) | \n\n | \n | (87 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Deferred income tax\n liabilities \n | \n \n | \n | (4,217 | \n) | \n\n | \n | (3,671 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net deferred income tax assets\n (liabilities) \n | \n \n | $ | \n(1,067 | \n) | \n\n | $ | \n(781 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | ||||||
| \n Reported As \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Current deferred income tax\n assets \n | \n \n | $ | \n1,915 | \n\n | \n | $ | \n1,941 | \n\n |
| \n Other current liabilities \n | \n \n | \n | (211 | \n) | \n\n | \n | (125 | \n) | \n
| \n Other long-term assets \n | \n \n | \n | 64 | \n\n | \n | \n | 131 | \n\n |
| \n Long-term deferred income tax\n liabilities \n | \n \n | \n | (2,835 | \n) | \n\n | \n | (2,728 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net deferred income tax assets\n (liabilities) \n | \n \n | $ | \n(1,067 | \n) | \n\n | $ | \n(781 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n As of June 30, 2015,\n we had net operating loss carryforwards of $4.6 billion, including\n $1.8 billion of foreign net operating loss carryforwards acquired\n through our acquisition of Skype, and $545 million through our\n acquisition of NDS. The valuation allowance disclosed in the table\n above relates to the foreign net operating loss carryforwards and\n other future deductible net deferred tax assets that may not be\n realized.
\n\n Deferred income tax\n balances reflect the effects of temporary differences between the\n carrying amounts of assets and liabilities and their tax bases and\n are stated at enacted tax rates expected to be in effect when the\n taxes are actually paid or recovered.
\n\n As of June 30, 2015,\n we have not provided deferred U.S. income taxes or foreign\n withholding taxes on temporary differences of approximately $108.3\n billion resulting from earnings for certain non-U.S. subsidiaries\n which are permanently reinvested outside the U.S. The unrecognized\n deferred tax liability associated with these temporary differences\n was approximately $34.5 billion at June 30, 2015.
\n\n Income taxes paid were\n $4.4 billion, $5.5 billion, and $3.9 billion in fiscal years 2015,\n 2014, and 2013, respectively.
\nUncertain Tax\n Positions
\n\n Unrecognized tax benefits\n as of June 30, 2015, 2014, and 2013, were $9.6 billion, $8.7\n billion, and $8.6 billion, respectively. If recognized, these tax\n benefits would affect our effective tax rates for fiscal years\n 2015, 2014, and 2013, by $7.9 billion, $7.0 billion, and $6.5\n billion, respectively.
\n\n As of June 30, 2015,\n 2014, and 2013, we had accrued interest expense related to\n uncertain tax positions of $1.7 billion, $1.5 billion, and $1.3\n billion, respectively, net of federal income tax benefits. Interest\n expense on unrecognized tax benefits was $237 million, $235\n million, and $400 million in fiscal years 2015, 2014, and 2013,\n respectively, and was included in income tax expense.
\n\n The aggregate changes in\n the balance of unrecognized tax benefits were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Balance, beginning of year \n | \n \n | $ | \n8,714 | \n\n | \n | $ | \n8,648 | \n\n | \n | $ | \n7,202 | \n\n |
| \n Decreases related to\n settlements \n | \n \n | \n | (50 | \n) | \n\n | \n | (583 | \n) | \n\n | \n | (30 | \n) | \n
| \n Increases for tax positions related\n to the current year \n | \n \n | \n | 1,091 | \n\n | \n | \n | 566 | \n\n | \n | \n | 612 | \n\n |
| \n Increases for tax positions related\n to prior years \n | \n \n | \n | 94 | \n\n | \n | \n | 217 | \n\n | \n | \n | 931 | \n\n |
| \n Decreases for tax positions related\n to prior years \n | \n \n | \n | (144 | \n) | \n\n | \n | (95 | \n) | \n\n | \n | (65 | \n) | \n
| \n Decreases due to lapsed statutes of\n limitations \n | \n \n | \n | (106 | \n) | \n\n | \n | (39 | \n) | \n\n | \n | (2 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Balance, end of year \n | \n \n | $ | \n9,599 | \n\n | \n | $ | \n8,714 | \n\n | \n | $ | \n8,648 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n During the third quarter\n of fiscal year 2011, we reached a settlement of a portion of an\n I.R.S. audit of tax years 2004 to 2006, which reduced our income\n tax expense by $461 million. While we settled a portion of the\n I.R.S. audit, we remain under audit for these years. In February\n 2012, the I.R.S. withdrew its 2011 Revenue Agents Report and\n reopened the audit phase of the examination. As of June 30,\n 2015, the primary unresolved issue relates to transfer pricing,\n which could have a significant impact on our consolidated financial\n statements if not resolved favorably. We believe our allowances for\n income tax contingencies are adequate. We have not received a\n proposed assessment for the unresolved issues and do not expect a\n final resolution of these issues in the next 12 months. Based\n on the information currently available, we do not anticipate a\n significant increase or decrease to our tax contingencies for these\n issues within the next 12 months. We also continue to be subject to\n examination by the I.R.S. for tax years 2007 to 2015.
\n\n We are subject to income\n tax in many jurisdictions outside the U.S. Our operations in\n certain jurisdictions remain subject to examination for tax years\n 1996 to 2015, some of which are currently under audit by local tax\n authorities. The resolutions of these audits are not expected to be\n material to our consolidated financial statements.
\n\n NOTE 1 —\n ACCOUNTING POLICIES
\n \nAccounting\n Principles
\n\n The consolidated\n financial statements and accompanying notes are prepared in\n accordance with accounting principles generally accepted in the\n United States of America (“U.S. GAAP”).
\n\n We have recast certain\n prior period amounts to conform to the current period presentation,\n with no impact on consolidated net income or cash flows.
\nPrinciples of\n Consolidation
\n\n The consolidated\n financial statements include the accounts of Microsoft Corporation\n and its subsidiaries. Intercompany transactions and balances have\n been eliminated. Equity investments through which we are able to\n exercise significant influence over but do not control the investee\n and are not the primary beneficiary of the investee’s\n activities are accounted for using the equity method. Investments\n through which we are not able to exercise significant influence\n over the investee and which do not have readily determinable fair\n values are accounted for under the cost method.
\nEstimates and\n Assumptions
\n\n Preparing financial\n statements requires management to make estimates and assumptions\n that affect the reported amounts of assets, liabilities, revenue,\n and expenses. Examples of estimates include: loss contingencies;\n product warranties; the fair value of, and/or potential impairment\n of goodwill and intangibles assets, for our reporting units;\n product life cycles; useful lives of our tangible and intangible\n assets; allowances for doubtful accounts; allowances for product\n returns; the market value of our inventory; and stock-based\n compensation forfeiture rates. Examples of assumptions include: the\n elements comprising a software arrangement, including the\n distinction between upgrades or enhancements and new products; when\n technological feasibility is achieved for our products; the\n potential outcome of future tax consequences of events that have\n been recognized in our consolidated financial statements or tax\n returns; and determining when investment impairments are\n other-than-temporary. Actual results and outcomes may differ from\n management’s estimates and assumptions.
\nForeign Currencies
\n\n Assets and liabilities\n recorded in foreign currencies are translated at the exchange rate\n on the balance sheet date. Revenue and expenses are translated at\n average rates of exchange prevailing during the year. Translation\n adjustments resulting from this process are recorded to other\n comprehensive income (“OCI”).
\nRevenue Recognition
\n\n Revenue is recognized\n when persuasive evidence of an arrangement exists, delivery has\n occurred, the fee is fixed or determinable, and collectability is\n probable. Revenue generally is recognized net of allowances for\n returns and any taxes collected from customers and subsequently\n remitted to governmental authorities.
\n\n Revenue recognition for\n multiple-element arrangements requires judgment to determine if\n multiple elements exist, whether elements can be accounted for as\n separate units of accounting, and if so, the fair value for each of\n the elements.
\n\n Microsoft enters into\n arrangements that can include various combinations of software,\n services, and hardware. Where elements are delivered over different\n periods of time, and when allowed under U.S. GAAP, revenue is\n allocated to the respective elements based on their relative\n selling prices at the inception of the arrangement, and revenue is\n recognized as each element is delivered. We use a hierarchy to\n determine the fair value to be used for allocating revenue to\n elements: (i) vendor-specific objective evidence of fair value\n (“VSOE”), (ii) third-party evidence, and\n (iii) best estimate of selling price (“ESP”). For\n software elements, we follow the industry specific software\n guidance which only allows for the use of VSOE in establishing fair\n value. Generally, VSOE is the price charged when the deliverable is\n sold separately or the price established by management for a\n product that is not yet sold if it is probable that the price will\n not change before introduction into the marketplace. ESPs are\n established as best estimates of what the selling prices would be\n if the deliverables were sold regularly on a stand-alone basis. Our\n process for determining ESPs requires judgment and considers\n multiple factors that may vary over time depending upon the unique\n facts and circumstances related to each deliverable.
\n\n Revenue for retail\n packaged products, products licensed to original equipment\n manufacturers (“OEMs”), and perpetual licenses under\n certain volume licensing programs generally is recognized as\n products are shipped or made available.
\n\n Technology guarantee\n programs are accounted for as multiple-element arrangements as\n customers receive free or significantly discounted rights to use\n upcoming new versions of a software product if they license\n existing versions of the product during the eligibility period.\n Revenue is allocated between the existing product and the new\n product, and revenue allocated to the new product is deferred until\n that version is delivered. The revenue allocation is based on the\n VSOE of fair value of the products. The VSOE of fair value for\n upcoming new products are based on the price determined by\n management having the relevant authority when the element is not\n yet sold separately, but is expected to be sold in the near future\n at the price set by management.
\n\n Software updates that\n will be provided free of charge are evaluated on a case-by-case\n basis to determine whether they meet the definition of an upgrade\n and create a multiple-element arrangement, which may require\n revenue to be deferred and recognized when the upgrade is\n delivered, or if it is determined that implied post-contract\n customer support (“PCS”) is being provided, the\n arrangement is accounted for as a multiple-element arrangement and\n all revenue from the arrangement is deferred and recognized over\n the implied PCS term when the VSOE of fair value does not exist. If\n updates are determined to not meet the definition of an upgrade,\n revenue is generally recognized as products are shipped or made\n available.
\n\n Certain volume licensing\n arrangements include a perpetual license for current products\n combined with rights to receive unspecified future versions of\n software products, which we have determined are additional software\n products and are therefore accounted for as subscriptions, with\n billings recorded as unearned revenue and recognized as revenue\n ratably over the coverage period. Arrangements that include\n term-based licenses for current products with the right to use\n unspecified future versions of the software during the coverage\n period, are also accounted for as subscriptions, with revenue\n recognized ratably over the coverage period.
\n\n Revenue from cloud-based\n services arrangements that allow for the use of a hosted software\n product or service over a contractually determined period of time\n without taking possession of software are accounted for as\n subscriptions with billings recorded as unearned revenue and\n recognized as revenue ratably over the coverage period beginning on\n the date the service is made available to customers. Revenue from\n cloud-based services arrangements that are provided on a\n consumption basis (for example, the amount of storage used in a\n particular period) is recognized commensurate with the customer\n utilization of such resources.
\n\n Some volume licensing\n arrangements include time-based subscriptions for cloud-based\n services and software offerings that are accounted for as\n subscriptions. These arrangements are considered multiple-element\n arrangements. However, because all elements are accounted for as\n subscriptions and have the same coverage period and delivery\n pattern, they have the same revenue recognition timing.
\n\n Revenue related to\n phones, Surface devices, Xbox consoles, games published by us, and\n other hardware components is generally recognized when ownership is\n transferred to the resellers or to end customers when selling\n directly through Microsoft retail stores and online marketplaces. A\n portion of revenue may be deferred when these products are combined\n with software elements, and/or services. Revenue related to\n licensing for games published by third parties for use on the Xbox\n consoles is recognized when games are manufactured by the game\n publishers.
\n\n Display advertising\n revenue is recognized as advertisements are displayed. Search\n advertising revenue is recognized when the ad appears in the search\n results or when the action necessary to earn the revenue has been\n completed. Consulting services revenue is recognized as services\n are rendered, generally based on the negotiated hourly rate in the\n consulting arrangement and the number of hours worked during the\n period. Consulting revenue for fixed-price services arrangements is\n recognized as services are provided. Revenue from prepaid points\n redeemable for the purchase of software or services is recognized\n upon redemption of the points and delivery of the software or\n services.
\nCost of Revenue
\n\n Cost of revenue includes:\n manufacturing and distribution costs for products sold and programs\n licensed; operating costs related to product support service\n centers and product distribution centers; costs incurred to include\n software on PCs sold by OEMs, to drive traffic to our websites, and\n to acquire online advertising space; costs incurred to support and\n maintain Internet-based products and services, including datacenter\n costs and royalties; warranty costs; inventory valuation\n adjustments; costs associated with the delivery of consulting\n services; and the amortization of capitalized software development\n costs. Capitalized software development costs are amortized over\n the estimated lives of the products.
\nProduct Warranty
\n\n We provide for the\n estimated costs of fulfilling our obligations under hardware and\n software warranties at the time the related revenue is recognized.\n For hardware warranties, we estimate the costs based on historical\n and projected product failure rates, historical and projected\n repair costs, and knowledge of specific product failures (if any).\n The specific hardware warranty terms and conditions vary depending\n upon the product sold and the country in which we do business, but\n generally include parts and labor over a period generally ranging\n from 90 days to three years. For software warranties, we\n estimate the costs to provide bug fixes, such as security patches,\n over the estimated life of the software. We regularly reevaluate\n our estimates to assess the adequacy of the recorded warranty\n liabilities and adjust the amounts as necessary.
\nResearch and\n Development
\n\n Research and development\n expenses include payroll, employee benefits, stock-based\n compensation expense, and other headcount-related expenses\n associated with product development. Research and development\n expenses also include third-party development and programming\n costs, localization costs incurred to translate software for\n international markets, and the amortization of purchased software\n code and services content. Such costs related to software\n development are included in research and development expense until\n the point that technological feasibility is reached, which for our\n software products, is generally shortly before the products are\n released to manufacturing. Once technological feasibility is\n reached, such costs are capitalized and amortized to cost of\n revenue over the estimated lives of the products.
\nSales and Marketing
\n\n Sales and marketing\n expenses include payroll, employee benefits, stock-based\n compensation expense, and other headcount-related expenses\n associated with sales and marketing personnel, and the costs of\n advertising, promotions, trade shows, seminars, and other programs.\n Advertising costs are expensed as incurred. Advertising expense was\n $1.9 billion, $2.3 billion, and $2.6 billion in fiscal years 2015,\n 2014, and 2013, respectively.
\nStock-Based\n Compensation
\n\n We measure stock-based\n compensation cost at the grant date based on the fair value of the\n award and recognize it as expense, net of estimated forfeitures,\n over the vesting or service period, as applicable, of the stock\n award (generally four to five years) using the straight-line\n method.
\n\n
\nEmployee Stock Purchase\n Plan
\n\n Shares of our common\n stock may be purchased by employees at three-month intervals at 90%\n of the fair market value of the stock on the last day of each\n three-month period. Compensation expense for the employee stock\n purchase plan is measured as the discount the employee is entitled\n to upon purchase and is recognized in the period of\n purchase.
\nIncome Taxes
\n\n Income tax expense\n includes U.S. and international income taxes, the provision for\n U.S. taxes on undistributed earnings of international subsidiaries\n not deemed to be permanently invested, and interest and penalties\n on uncertain tax positions. Certain income and expenses are not\n reported in tax returns and financial statements in the same year.\n The tax effect of such temporary differences is reported as\n deferred income taxes. Deferred tax assets are reported net of a\n valuation allowance when it is more likely than not that a tax\n benefit will not be realized. The deferred income taxes are\n classified as current or long-term based on the classification of\n the related asset or liability.
\nFair Value\n Measurements
\n\n We account for certain\n assets and liabilities at fair value. The hierarchy below lists\n three levels of fair value based on the extent to which inputs used\n in measuring fair value are observable in the market. We\n categorize each of our fair value measurements in one of these\n three levels based on the lowest level input that is significant to\n the fair value measurement in its entirety. These levels\n are:
\n\n
\n| \n | • | \n\n | \n Level 1 – inputs are based upon unadjusted quoted\n prices for identical instruments traded in active markets. Our\n Level 1 non-derivative investments primarily include U.S.\n government securities, domestic and international equities, and\n actively traded mutual funds. Our Level 1 derivative assets\n and liabilities include those actively traded on\n exchanges. \n | \n
\n
\n| \n | • | \n\n | \n Level 2 – inputs are based upon quoted prices for\n similar instruments in active markets, quoted prices for identical\n or similar instruments in markets that are not active, and\n model-based valuation techniques (e.g. the Black-Scholes model) for\n which all significant inputs are observable in the market or can be\n corroborated by observable market data for substantially the full\n term of the assets or liabilities. Where applicable, these models\n project future cash flows and discount the future amounts to a\n present value using market-based observable inputs including\n interest rate curves, credit spreads, foreign exchange rates, and\n forward and spot prices for currencies and commodities. Our Level 2\n non-derivative investments consist primarily of corporate notes and\n bonds, common and preferred stock, mortgage- and asset-backed\n securities, U.S. government and agency securities, and foreign\n government bonds. Our Level 2 derivative assets and liabilities\n primarily include certain over-the-counter option and swap\n contracts. \n | \n
\n
\n| \n | • | \n\n | \n Level 3 – inputs are generally unobservable and\n typically reflect management’s estimates of assumptions that\n market participants would use in pricing the asset or liability.\n The fair values are therefore determined using model-based\n techniques, including option pricing models and discounted cash\n flow models. Our Level 3 non-derivative assets primarily comprise\n investments in common and preferred stock and goodwill when it is\n recorded at fair value due to an impairment\n charge. Unobservable inputs used in the models are significant\n to the fair values of the assets and liabilities. Our Level 3\n derivative assets and liabilities primarily include equity\n derivatives. \n | \n
\n We measure certain\n assets, including our cost and equity method investments, at fair\n value on a nonrecurring basis when they are deemed to be\n other-than-temporarily impaired. The fair values of these\n investments are determined based on valuation techniques using the\n best information available, and may include quoted market prices,\n market comparables, and discounted cash flow projections. An\n impairment charge is recorded when the cost of the investment\n exceeds its fair value and this condition is determined to be\n other-than-temporary.
\n\n Our other current\n financial assets and our current financial liabilities have fair\n values that approximate their carrying values.
\n\n
\nFinancial\n Instruments
\n\n We consider all highly\n liquid interest-earning investments with a maturity of three months\n or less at the date of purchase to be cash equivalents. The fair\n values of these investments approximate their carrying values. In\n general, investments with original maturities of greater than three\n months and remaining maturities of less than one year are\n classified as short-term investments. Investments with maturities\n beyond one year may be classified as short-term based on their\n highly liquid nature and because such marketable securities\n represent the investment of cash that is available for current\n operations. All cash equivalents and short-term investments are\n classified as available-for-sale and realized gains and losses are\n recorded using the specific identification method. Changes in\n market value, excluding other-than-temporary impairments, are\n reflected in OCI.
\n\n Equity and other\n investments classified as long-term include both debt and equity\n instruments. With the exception of certain corporate notes that are\n classified as held-to-maturity, debt and publicly-traded equity\n securities are classified as available-for-sale and realized gains\n and losses are recorded using the specific identification method.\n Changes in the market value of available-for-sale securities,\n excluding other-than-temporary impairments, are reflected in OCI.\n Held-to-maturity investments are recorded and held at amortized\n cost. Common and preferred stock and other investments that are\n restricted for more than one year or are not publicly traded are\n recorded at cost or using the equity method.
\n\n We lend certain\n fixed-income and equity securities to increase investment returns.\n The loaned securities continue to be carried as investments on our\n balance sheet. Cash and/or security interests are received as\n collateral for the loaned securities with the amount determined\n based upon the underlying security lent and the creditworthiness of\n the borrower. Cash received is recorded as an asset with a\n corresponding liability.
\n\n Investments are\n considered to be impaired when a decline in fair value is judged to\n be other-than-temporary. Fair value is calculated based on publicly\n available market information or other estimates determined by\n management. We employ a systematic methodology on a quarterly basis\n that considers available quantitative and qualitative evidence in\n evaluating potential impairment of our investments. If the cost of\n an investment exceeds its fair value, we evaluate, among other\n factors, general market conditions, credit quality of debt\n instrument issuers, the duration and extent to which the fair value\n is less than cost, and for equity securities, our intent and\n ability to hold, or plans to sell, the investment. For fixed-income\n securities, we also evaluate whether we have plans to sell the\n security or it is more likely than not that we will be required to\n sell the security before recovery. We also consider specific\n adverse conditions related to the financial health of and business\n outlook for the investee, including industry and sector\n performance, changes in technology, and operational and financing\n cash flow factors. Once a decline in fair value is determined to be\n other-than-temporary, an impairment charge is recorded to other\n income (expense), net and a new cost basis in the investment is\n established.
\n\n Derivative instruments\n are recognized as either assets or liabilities and are measured at\n fair value. The accounting for changes in the fair value of a\n derivative depends on the intended use of the derivative and the\n resulting designation.
\n\n For derivative\n instruments designated as fair value hedges, the gains (losses) are\n recognized in earnings in the periods of change together with the\n offsetting losses (gains) on the hedged items attributed to the\n risk being hedged. For options designated as fair value hedges,\n changes in the time value are excluded from the assessment of hedge\n effectiveness and are recognized in earnings.
\n\n For derivative\n instruments designated as cash-flow hedges, the effective portion\n of the gains (losses) on the derivatives is initially reported as a\n component of OCI and is subsequently recognized in earnings when\n the hedged exposure is recognized in earnings. For options\n designated as cash-flow hedges, changes in the time value are\n excluded from the assessment of hedge effectiveness and are\n recognized in earnings. Gains (losses) on derivatives representing\n either hedge components excluded from the assessment of\n effectiveness or hedge ineffectiveness are recognized in\n earnings.
\n\n For derivative\n instruments that are not designated as hedges, gains (losses) from\n changes in fair values are primarily recognized in other income\n (expense), net. Other than those derivatives entered into for\n investment purposes, such as commodity contracts, the gains\n (losses) are generally economically offset by unrealized gains\n (losses) in the underlying available-for-sale securities, which are\n recorded as a component of OCI until the securities are sold or\n other-than-temporarily impaired, at which time the amounts are\n reclassified from accumulated other comprehensive income\n (“AOCI”) into other income (expense), net.
\nAllowance for Doubtful\n Accounts
\n\n The allowance for\n doubtful accounts reflects our best estimate of probable losses\n inherent in the accounts receivable balance. We determine the\n allowance based on known troubled accounts, historical experience,\n and other currently available evidence. Activity in the allowance\n for doubtful accounts was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Balance, beginning of\n period \n | \n \n | $ | \n301 | \n\n | \n | $ | \n336 | \n\n | \n | $ | \n389 | \n\n |
| \n Charged to costs and other \n | \n \n | \n | 77 | \n\n | \n | \n | 16 | \n\n | \n | \n | 4 | \n\n |
| \n Write-offs \n | \n \n | \n | (43 | \n) | \n\n | \n | (51 | \n) | \n\n | \n | (57 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Balance, end of period \n | \n \n | $ | \n335 | \n\n | \n | $ | \n301 | \n\n | \n | $ | \n336 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Inventories
\n\n Inventories are stated at\n average cost, subject to the lower of cost or market. Cost includes\n materials, labor, and manufacturing overhead related to the\n purchase and production of inventories. We regularly review\n inventory quantities on hand, future purchase commitments with our\n suppliers, and the estimated utility of our inventory. If our\n review indicates a reduction in utility below carrying value, we\n reduce our inventory to a new cost basis through a charge to cost\n of revenue. The determination of market value and the estimated\n volume of demand used in the lower of cost or market analysis\n require significant judgment.
\nProperty and\n Equipment
\n\n Property and equipment is\n stated at cost and depreciated using the straight-line method over\n the shorter of the estimated useful life of the asset or the lease\n term. The estimated useful lives of our property and equipment are\n generally as follows: computer software developed or acquired for\n internal use, three to seven years; computer equipment, two to\n three years; buildings and improvements, five to 15 years;\n leasehold improvements, three to 20 years; and furniture and\n equipment, one to 10 years. Land is not depreciated.
\nGoodwill
\n\n Goodwill is tested for\n impairment at the reporting unit level (operating segment or one\n level below an operating segment) on an annual basis (May 1 for us)\n and between annual tests if an event occurs or circumstances change\n that would more likely than not reduce the fair value of a\n reporting unit below its carrying value.
\nIntangible Assets
\n\n All of our intangible\n assets are subject to amortization and are amortized using the\n straight-line method over their estimated period of benefit,\n ranging from one to 15 years. We evaluate the recoverability of\n intangible assets periodically by taking into account events or\n circumstances that may warrant revised estimates of useful lives or\n that indicate the asset may be impaired.
\n\n
\nRecent Accounting Guidance Not Yet\n Adopted
\n\n In May 2014, as part of\n its ongoing efforts to assist in the convergence of U.S. GAAP and\n International Financial Reporting Standards, the Financial\n Accounting Standards Board (“FASB”) issued a new\n standard related to revenue recognition. Under the new standard,\n recognition of revenue occurs when a customer obtains control of\n promised goods or services in an amount that reflects the\n consideration which the entity expects to receive in exchange for\n those goods or services. In addition, the standard requires\n disclosure of the nature, amount, timing, and uncertainty of\n revenue and cash flows arising from contracts with customers. The\n new standard will be effective for us beginning July 1, 2018,\n and adoption as of the original effective date of July 1, 2017\n is permitted. We anticipate this standard will have a material\n impact on our consolidated financial statements, and we are\n currently evaluating its impact.
\n\n The components of\n intangible assets, all of which are finite-lived, were as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Gross \n Carrying \n Amount | \n \n | \n | Accumulated \n Amortization | \n \n | \n | Net Carrying \n Amount | \n \n | \n | Gross \n Carrying \n Amount | \n \n | \n | Accumulated \n Amortization | \n \n | \n | Net Carrying \n Amount | \n \n | ||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| Year Ended June 30, | \n\n | \n | \n | \n | \n | \n | \n | 2015 | \n\n | \n | \n | \n | \n | \n | \n | \n | 2014 | \n\n | ||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Technology-based (a) \n | \n \n | $ | \n6,187 | \n\n | \n | $ | \n(3,410 | \n) | \n\n | $ | \n2,777 | \n\n | \n | $ | \n6,440 | \n\n | \n | $ | \n(2,615 | \n) | \n\n | $ | \n3,825 | \n\n |
| \n Marketing-related \n | \n \n | \n | 1,974 | \n\n | \n | \n | (540 | \n) | \n\n | \n | 1,434 | \n\n | \n | \n | 1,518 | \n\n | \n | \n | (324 | \n) | \n\n | \n | 1,194 | \n\n |
| \n Contract-based \n | \n \n | \n | 1,344 | \n\n | \n | \n | (862 | \n) | \n\n | \n | 482 | \n\n | \n | \n | 2,266 | \n\n | \n | \n | (716 | \n) | \n\n | \n | 1,550 | \n\n |
| \n Customer-related \n | \n \n | \n | 632 | \n\n | \n | \n | (490 | \n) | \n\n | \n | 142 | \n\n | \n | \n | 732 | \n\n | \n | \n | (320 | \n) | \n\n | \n | 412 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n10,137 | \n\n | \n | $ | \n(5,302 | \n) | \n\n | $ | \n4,835 | \n\n | \n | $ | \n10,956 | \n\n | \n | $ | \n(3,975 | \n) | \n\n | $ | \n6,981 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Technology-based intangible assets included $116 million and\n $98 million as of June 30, 2015 and 2014, respectively, of net\n carrying amount of software to be sold, leased, or otherwise\n marketed. \n | \n
Estimates and\n Assumptions
\n\n Preparing financial\n statements requires management to make estimates and assumptions\n that affect the reported amounts of assets, liabilities, revenue,\n and expenses. Examples of estimates include: loss contingencies;\n product warranties; the fair value of, and/or potential impairment\n of goodwill and intangibles assets, for our reporting units;\n product life cycles; useful lives of our tangible and intangible\n assets; allowances for doubtful accounts; allowances for product\n returns; the market value of our inventory; and stock-based\n compensation forfeiture rates. Examples of assumptions include: the\n elements comprising a software arrangement, including the\n distinction between upgrades or enhancements and new products; when\n technological feasibility is achieved for our products; the\n potential outcome of future tax consequences of events that have\n been recognized in our consolidated financial statements or tax\n returns; and determining when investment impairments are\n other-than-temporary. Actual results and outcomes may differ from\n management’s estimates and assumptions.
\n\n NOTE 19 —\n STOCKHOLDERS’ EQUITY
\nShares Outstanding
\n\n Shares of common stock\n outstanding were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Balance, beginning of year \n | \n \n | \n | 8,239 | \n\n | \n | \n | 8,328 | \n\n | \n | \n | 8,381 | \n\n |
| \n Issued \n | \n \n | \n | 83 | \n\n | \n | \n | 86 | \n\n | \n | \n | 105 | \n\n |
| \n Repurchased \n | \n \n | \n | (295 | \n) | \n\n | \n | (175 | \n) | \n\n | \n | (158 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Balance, end of year \n | \n \n | \n | 8,027 | \n\n | \n | \n | 8,239 | \n\n | \n | \n | 8,328 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Share Repurchases
\n\n On September 16,\n 2013, our Board of Directors approved a share repurchase program\n authorizing up to $40.0 billion in share repurchases. The share\n repurchase program became effective on October 1, 2013, has no\n expiration date, and may be suspended or discontinued at any time\n without notice. This share repurchase program replaced the share\n repurchase program that was announced on September 22, 2008\n and expired on September 30, 2013. As of June 30, 2015,\n $21.9 billion remained of our $40.0 billion share repurchase\n program. All repurchases were made using cash resources.
\n\n
\n\n We repurchased the\n following shares of common stock under the above-described\n repurchase plans:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Shares | \n\n | \n | Amount | \n\n | \n | Shares | \n\n | \n | Amount | \n\n | \n | Shares | \n\n | \n | Amount | \n\n | ||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | |||||||||||||||||||||
| Year Ended June 30, | \n\n | \n | 2015 | \n\n | \n | \n | 2014 (a) | \n\n | \n | \n | 2013 | \n\n | ||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n First quarter \n | \n \n | \n | 43 | \n\n | \n | $ | \n2,000 | \n\n | \n | \n | 47 | \n\n | \n | $ | \n1,500 | \n\n | \n | \n | 33 | \n\n | \n | $ | \n1,000 | \n\n |
| \n Second quarter \n | \n \n | \n | 43 | \n\n | \n | \n | 2,000 | \n\n | \n | \n | 53 | \n\n | \n | \n | 2,000 | \n\n | \n | \n | 58 | \n\n | \n | \n | 1,607 | \n\n |
| \n Third quarter \n | \n \n | \n | 116 | \n\n | \n | \n | 5,000 | \n\n | \n | \n | 47 | \n\n | \n | \n | 1,791 | \n\n | \n | \n | 36 | \n\n | \n | \n | 1,000 | \n\n |
| \n Fourth quarter \n | \n \n | \n | 93 | \n\n | \n | \n | 4,209 | \n\n | \n | \n | 28 | \n\n | \n | \n | 1,118 | \n\n | \n | \n | 31 | \n\n | \n | \n | 1,000 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | \n | 295 | \n\n | \n | $ | \n13,209 | \n\n | \n | \n | 175 | \n\n | \n | $ | \n6,409 | \n\n | \n | \n | 158 | \n\n | \n | $ | \n4,607 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Of\n the 175 million shares repurchased in fiscal year 2014,\n 128 million shares were repurchased for $4.9 billion under the\n share repurchase program approved by our Board of Directors on\n September 16, 2013 and 47 million shares were repurchased\n for $1.5 billion under the share repurchase program that was\n announced on September 22, 2008 and expired on\n September 30, 2013. \n | \n
\n The above table excludes\n shares repurchased to settle statutory employee tax withholding\n related to the vesting of stock awards.
\nDividends
\n\n In fiscal year 2015, our\n Board of Directors declared the following dividends:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Declaration Date | \n\n | \n \n Dividend \n\n Per Share \n | \n \n | \n | Record Date | \n\n | \n | Total Amount | \n\n | \n | Payment Date | \n\n | ||||
| \n | \n \n | \n |||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | (In millions) | \n\n | \n | \n | \n | ||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n September 16,\n 2014 \n | \n \n | \n | $ 0.31 | \n\n | \n | \n | November 20, 2014 | \n\n | \n | \n | $ 2,547 | \n\n | \n | \n | December 11, 2014 | \n\n |
| \n December 3,\n 2014 \n | \n \n | \n | $ 0.31 | \n\n | \n | \n | February 19, 2015 | \n\n | \n | \n | $ 2,532 | \n\n | \n | \n | March 12, 2015 | \n\n |
| \n March 10, 2015 \n | \n \n | \n | $ 0.31 | \n\n | \n | \n | May 21, 2015 | \n\n | \n | \n | $ 2,496 | \n\n | \n | \n | June 11, 2015 | \n\n |
| \n June 9, 2015 \n | \n \n | \n | $ 0.31 | \n\n | \n | \n | August 20, 2015 | \n\n | \n | \n | $ 2,488 | \n\n | \n | \n | September 10, 2015 | \n\n |
| \n | \n \n | \n
\n The dividend declared on\n June 9, 2015 will be paid after the filing date of this Form\n 10-K and was included in other current liabilities as of\n June 30, 2015.
\n\n In fiscal year 2014, our\n Board of Directors declared the following dividends:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Declaration Date | \n\n | \n \n Dividend \n\n Per Share \n | \n \n | \n | Record Date | \n\n | \n | Total Amount | \n\n | \n | Payment Date | \n\n | ||||
| \n | \n \n | \n |||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | (In millions) | \n\n | \n | \n | \n | ||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n September 16, 2013 \n | \n \n | $ | \n0.28 | \n\n | \n | \n | November 21, 2013 | \n\n | \n | $ | \n2,332 | \n\n | \n | \n | December 12, 2013 | \n\n |
| \n November 19, 2013 \n | \n \n | $ | \n0.28 | \n\n | \n | \n | February 20, 2014 | \n\n | \n | $ | \n2,322 | \n\n | \n | \n | March 13, 2014 | \n\n |
| \n March 11, 2014 \n | \n \n | $ | \n0.28 | \n\n | \n | \n | May 15, 2014 | \n\n | \n | $ | \n2,309 | \n\n | \n | \n | June 12, 2014 | \n\n |
| \n June 10, 2014 \n | \n \n | $ | \n0.28 | \n\n | \n | \n | August 21, 2014 | \n\n | \n | $ | \n2,307 | \n\n | \n | \n | September 11, 2014 | \n\n |
| \n | \n \n | \n
\n The dividend declared on\n June 10, 2014 was included in other current liabilities as of\n June 30, 2014.
\nThe\n following tables present the fair value of our financial\n instruments that are measured at fair value on a recurring\n basis:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | \n \n Gross \n\n Fair \n\n Value \n | \n \n | \n | Netting (a) | \n\n | \n | Net Fair \n Value | \n \n | ||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| June 30, 2015 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Assets \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Mutual funds \n | \n \n | $ | \n1,100 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n1,100 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n1,100 | \n\n |
| \n Commercial paper \n | \n \n | \n | 0 | \n\n | \n | \n | 1 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1 | \n\n |
| \n Certificates of deposit \n | \n \n | \n | 0 | \n\n | \n | \n | 906 | \n\n | \n | \n | 0 | \n\n | \n | \n | 906 | \n\n | \n | \n | 0 | \n\n | \n | \n | 906 | \n\n |
| \n U.S. government and agency\n securities \n | \n \n | \n | 71,930 | \n\n | \n | \n | 955 | \n\n | \n | \n | 0 | \n\n | \n | \n | 72,885 | \n\n | \n | \n | 0 | \n\n | \n | \n | 72,885 | \n\n |
| \n Foreign government bonds \n | \n \n | \n | 131 | \n\n | \n | \n | 5,299 | \n\n | \n | \n | 0 | \n\n | \n | \n | 5,430 | \n\n | \n | \n | 0 | \n\n | \n | \n | 5,430 | \n\n |
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 0 | \n\n | \n | \n | 4,917 | \n\n | \n | \n | 0 | \n\n | \n | \n | 4,917 | \n\n | \n | \n | 0 | \n\n | \n | \n | 4,917 | \n\n |
| \n Corporate notes and bonds \n | \n \n | \n | 0 | \n\n | \n | \n | 7,108 | \n\n | \n | \n | 1 | \n\n | \n | \n | 7,109 | \n\n | \n | \n | 0 | \n\n | \n | \n | 7,109 | \n\n |
| \n Municipal securities \n | \n \n | \n | 0 | \n\n | \n | \n | 319 | \n\n | \n | \n | 0 | \n\n | \n | \n | 319 | \n\n | \n | \n | 0 | \n\n | \n | \n | 319 | \n\n |
| \n Common and preferred stock \n | \n \n | \n | 8,585 | \n\n | \n | \n | 2,277 | \n\n | \n | \n | 14 | \n\n | \n | \n | 10,876 | \n\n | \n | \n | 0 | \n\n | \n | \n | 10,876 | \n\n |
| \n Derivatives \n | \n \n | \n | 4 | \n\n | \n | \n | 979 | \n\n | \n | \n | 5 | \n\n | \n | \n | 988 | \n\n | \n | \n | (162 | \n) | \n\n | \n | 826 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n81,750 | \n\n | \n | $ | \n22,761 | \n\n | \n | $ | \n20 | \n\n | \n | $ | \n104,531 | \n\n | \n | $ | \n(162 | \n) | \n\n | $ | \n104,369 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Liabilities \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Derivatives and other \n | \n \n | $ | \n5 | \n\n | \n | $ | \n159 | \n\n | \n | $ | \n54 | \n\n | \n | $ | \n218 | \n\n | \n | $ | \n(161 | \n) | \n\n | $ | \n57 | \n\n |
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| (In millions) | \n\n | \n | Level 1 | \n\n | \n | \n | Level 2 | \n\n | \n | \n | Level 3 | \n\n | \n | \n \n \n | \n Gross \n \n Fair \n\n Value \n | \n \n \n \n | \n \n | \n | Netting | \n(a) | \n\n | \n | \n Net Fair \n Value | \n \n | \n
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| June 30, 2014 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Assets \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Mutual funds \n | \n \n | $ | \n590 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n590 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n590 | \n\n |
| \n Commercial paper \n | \n \n | \n | 0 | \n\n | \n | \n | 189 | \n\n | \n | \n | 0 | \n\n | \n | \n | 189 | \n\n | \n | \n | 0 | \n\n | \n | \n | 189 | \n\n |
| \n Certificates of deposit \n | \n \n | \n | 0 | \n\n | \n | \n | 1,197 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,197 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,197 | \n\n |
| \n U.S. government and agency\n securities \n | \n \n | \n | 66,288 | \n\n | \n | \n | 745 | \n\n | \n | \n | 0 | \n\n | \n | \n | 67,033 | \n\n | \n | \n | 0 | \n\n | \n | \n | 67,033 | \n\n |
| \n Foreign government bonds \n | \n \n | \n | 139 | \n\n | \n | \n | 3,210 | \n\n | \n | \n | 0 | \n\n | \n | \n | 3,349 | \n\n | \n | \n | 0 | \n\n | \n | \n | 3,349 | \n\n |
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 0 | \n\n | \n | \n | 1,015 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,015 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,015 | \n\n |
| \n Corporate notes and bonds \n | \n \n | \n | 0 | \n\n | \n | \n | 6,863 | \n\n | \n | \n | 0 | \n\n | \n | \n | 6,863 | \n\n | \n | \n | 0 | \n\n | \n | \n | 6,863 | \n\n |
| \n Municipal securities \n | \n \n | \n | 0 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n | \n | \n | 332 | \n\n |
| \n Common and preferred stock \n | \n \n | \n | 9,552 | \n\n | \n | \n | 1,825 | \n\n | \n | \n | 14 | \n\n | \n | \n | 11,391 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,391 | \n\n |
| \n Derivatives \n | \n \n | \n | 5 | \n\n | \n | \n | 348 | \n\n | \n | \n | 7 | \n\n | \n | \n | 360 | \n\n | \n | \n | (155 | \n) | \n\n | \n | 205 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n76,574 | \n\n | \n | $ | \n15,724 | \n\n | \n | $ | \n21 | \n\n | \n | $ | \n92,319 | \n\n | \n | $ | \n(155 | \n) | \n\n | $ | \n92,164 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Liabilities \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Derivatives and other \n | \n \n | $ | \n5 | \n\n | \n | $ | \n153 | \n\n | \n | $ | \n126 | \n\n | \n | $ | \n284 | \n\n | \n | $ | \n(155 | \n) | \n\n | $ | \n129 | \n\n |
| \n | \n \n | \n
\n
\n| (a) | \n\n These amounts represent the impact of netting derivative\n assets and derivative liabilities when a legally enforceable master\n netting agreement exists and fair value adjustments related to our\n own credit risk and counterparty credit risk. \n | \n
NOTE 23\n — QUARTERLY INFORMATION (UNAUDITED)
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions, except per share amounts) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |||||
| \n | \n \n | \n |||||||||||||||||||
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| Quarter Ended | \n\n | \n | September 30 | \n\n | \n | \n | December 31 | \n\n | \n | \n | March 31 | \n\n | \n | \n | June 30 | \n\n | \n | \n | Total | \n\n |
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| \n Fiscal Year 2015 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| \n Revenue \n | \n \n | \n | $ 23,201 | \n\n | \n | \n | $ 26,470 | \n\n | \n | \n | $ 21,729 | \n\n | \n | \n | $ 22,180 | \n\n | \n | \n | $ 93,580 | \n\n |
| \n Gross margin \n | \n \n | \n | 14,928 | \n\n | \n | \n | 16,334 | \n\n | \n | \n | 14,568 | \n\n | \n | \n | 14,712 | \n\n | \n | \n | 60,542 | \n\n |
| \n Net income (loss) \n | \n \n | \n | 4,540 | \n\n | \n | \n | 5,863 | \n\n | \n | \n | 4,985 | \n\n | \n | \n | (3,195 | \n) (a) | \n\n | \n | 12,193 | \n(b) | \n
| \n Basic earnings (loss) per\n share \n | \n \n | \n | 0.55 | \n\n | \n | \n | 0.71 | \n\n | \n | \n | 0.61 | \n\n | \n | \n | (0.40 | \n) | \n\n | \n | 1.49 | \n\n |
| \n Diluted earnings (loss) per\n share \n | \n \n | \n | 0.54 | \n\n | \n | \n | 0.71 | \n\n | \n | \n | 0.61 | \n\n | \n | \n | (0.40 | \n) (a) | \n\n | \n | 1.48 | \n(b) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| \n Fiscal Year 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | |||||||||||||||
| \n Revenue \n | \n \n | \n | $ 18,529 | \n\n | \n | \n | $ 24,519 | \n\n | \n | \n | $ 20,403 | \n\n | \n | \n | $ 23,382 | \n\n | \n | \n | $ 86,833 | \n\n |
| \n Gross margin \n | \n \n | \n | 13,384 | \n\n | \n | \n | 16,197 | \n\n | \n | \n | 14,425 | \n\n | \n | \n | 15,749 | \n\n | \n | \n | 59,755 | \n\n |
| \n Net income \n | \n \n | \n | 5,244 | \n\n | \n | \n | 6,558 | \n\n | \n | \n | 5,660 | \n\n | \n | \n | 4,612 | \n\n (c) | \n\n | \n | 22,074 | \n(c) | \n
| \n Basic earnings per share \n | \n \n | \n | 0.63 | \n\n | \n | \n | 0.79 | \n\n | \n | \n | 0.68 | \n\n | \n | \n | 0.56 | \n\n | \n | \n | 2.66 | \n\n |
| \n Diluted earnings per share \n | \n \n | \n | 0.62 | \n\n | \n | \n | 0.78 | \n\n | \n | \n | 0.68 | \n\n | \n | \n | 0.55 | \n\n (c) | \n\n | \n | 2.63 | \n(c) | \n
| \n | \n \n | \n
\n
\n| (a) | \n\n Includes $7.5 billion of goodwill and asset impairment\n charges related to Phone Hardware, as well as $940 million of\n integration and restructuring expenses, primarily costs associated\n with our Phone Hardware Restructuring Plan, which decreased fourth\n quarter fiscal year 2015 net income by $8.4 billion and diluted EPS\n by $1.02. \n | \n
| (b) | \n\n Includes $7.5 billion of goodwill and asset impairment\n charges related to Phone Hardware, as well as $2.5 billion of\n integration and restructuring expenses, primarily costs associated\n with our restructuring plans, which decreased fiscal year 2015 net\n income by $10.0 billion and diluted EPS by $1.15. \n | \n
| (c) | \n\n Includes a tax provision adjustment recorded in the fourth\n quarter of fiscal year 2014 related to adjustments to prior\n years’ liabilities for intercompany transfer pricing which\n decreased net income by $458 million and diluted EPS by\n $0.05. \n | \n
\n Following are details of\n net recognized gains on investments during the periods\n reported:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Other-than-temporary impairments of\n investments \n | \n \n | $ | \n(183 | \n) | \n\n | $ | \n(106 | \n) | \n\n | $ | \n(208 | \n) | \n
| \n Realized gains from sales of\n available-for-sale securities \n | \n \n | \n | 1,176 | \n\n | \n | \n | 776 | \n\n | \n | \n | 489 | \n\n |
| \n Realized losses from sales of\n available-for-sale securities \n | \n \n | \n | (277 | \n) | \n\n | \n | (233 | \n) | \n\n | \n | (165 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n716 | \n\n | \n | $ | \n437 | \n\n | \n | $ | \n116 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Goodwill
\n\n Goodwill is tested for\n impairment at the reporting unit level (operating segment or one\n level below an operating segment) on an annual basis (May 1 for us)\n and between annual tests if an event occurs or circumstances change\n that would more likely than not reduce the fair value of a\n reporting unit below its carrying value.
\n\n NOTE 15 —\n UNEARNED REVENUE
\n\n Unearned revenue by\n segment was as follows, with segments with significant balances\n shown separately:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Commercial Licensing \n | \n \n | $ | \n17,672 | \n\n | \n | $ | \n19,099 | \n\n |
| \n Commercial Other \n | \n \n | \n | 5,641 | \n\n | \n | \n | 3,934 | \n\n |
| \n Rest of the segments \n | \n \n | \n | 2,005 | \n\n | \n | \n | 2,125 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n25,318 | \n\n | \n | $ | \n25,158 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Shares of common stock\n outstanding were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Balance, beginning of year \n | \n \n | \n | 8,239 | \n\n | \n | \n | 8,328 | \n\n | \n | \n | 8,381 | \n\n |
| \n Issued \n | \n \n | \n | 83 | \n\n | \n | \n | 86 | \n\n | \n | \n | 105 | \n\n |
| \n Repurchased \n | \n \n | \n | (295 | \n) | \n\n | \n | (175 | \n) | \n\n | \n | (158 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Balance, end of year \n | \n \n | \n | 8,027 | \n\n | \n | \n | 8,239 | \n\n | \n | \n | 8,328 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n NOTE 5 —\n DERIVATIVES
\n\n We use derivative\n instruments to manage risks related to foreign currencies, equity\n prices, interest rates, and credit; to enhance investment returns;\n and to facilitate portfolio diversification. Our objectives for\n holding derivatives include reducing, eliminating, and efficiently\n managing the economic impact of these exposures as effectively as\n possible.
\n\n Our derivative programs\n include strategies that both qualify and do not qualify for hedge\n accounting treatment. All notional amounts presented below are\n measured in U.S. dollar equivalents.
\n\n
\nForeign Currency
\n\n Certain forecasted\n transactions, assets, and liabilities are exposed to foreign\n currency risk. We monitor our foreign currency exposures daily to\n maximize the economic effectiveness of our foreign currency hedge\n positions. Option and forward contracts are used to hedge a portion\n of forecasted international revenue for up to three years in the\n future and are designated as cash flow hedging instruments.\n Principal currencies hedged include the euro, Japanese yen, British\n pound, Canadian dollar, and Australian dollar. As of June 30,\n 2015 and June 30, 2014, the total notional amounts of these\n foreign exchange contracts sold were $9.8 billion and $4.9 billion,\n respectively.
\n\n Foreign currency risks\n related to certain non-U.S. dollar denominated securities are\n hedged using foreign exchange forward contracts that are designated\n as fair value hedging instruments. As of June 30, 2015 and\n June 30, 2014, the total notional amounts of these foreign\n exchange contracts sold were $5.3 billion and $3.1 billion,\n respectively.
\n\n Certain options and\n forwards not designated as hedging instruments are also used to\n manage the variability in foreign exchange rates on certain balance\n sheet amounts and to manage other foreign currency\n exposures. As of June 30, 2015, the total notional\n amounts of these foreign exchange contracts purchased and sold were\n $9.7 billion and $11.0 billion, respectively. As of June 30,\n 2014, the total notional amounts of these foreign exchange\n contracts purchased and sold were $6.2 billion and $8.5 billion,\n respectively.
\nEquity
\n\n Securities held in our\n equity and other investments portfolio are subject to market price\n risk. Market price risk is managed relative to broad-based\n global and domestic equity indices using certain convertible\n preferred investments, options, futures, and swap contracts not\n designated as hedging instruments. From time to time, to hedge our\n price risk, we may use and designate equity derivatives as hedging\n instruments, including puts, calls, swaps, and forwards. As of\n June 30, 2015, the total notional amounts of equity contracts\n purchased and sold for managing market price risk were $2.2 billion\n and $2.6 billion, respectively, of which $1.1 billion and $1.4\n billion, respectively, were designated as hedging instruments. As\n of June 30, 2014, the total notional amounts of equity\n contracts purchased and sold for managing market price risk were\n $1.9 billion and $1.9 billion, respectively, of which $362 million\n and $420 million, respectively, were designated as hedging\n instruments.
\nInterest Rate
\n\n Securities held in our\n fixed-income portfolio are subject to different interest rate risks\n based on their maturities. We manage the average maturity of our\n fixed-income portfolio to achieve economic returns that correlate\n to certain broad-based fixed-income indices using exchange-traded\n option and futures contracts and over-the-counter swap and option\n contracts, none of which are designated as hedging instruments. As\n of June 30, 2015, the total notional amounts of fixed-interest\n rate contracts purchased and sold were $1.0 billion and $3.2\n billion, respectively. As of June 30, 2014, the total notional\n amounts of fixed-interest rate contracts purchased and sold were\n $1.7 billion and $936 million, respectively.
\n\n In addition, we use\n “To Be Announced” forward purchase commitments of\n mortgage-backed assets to gain exposure to agency mortgage-backed\n securities. These meet the definition of a derivative\n instrument in cases where physical delivery of the assets is not\n taken at the earliest available delivery date. As of June 30,\n 2015 and 2014, the total notional derivative amounts of mortgage\n contracts purchased were $812 million and $1.1 billion,\n respectively.
\nCredit
\n\n Our fixed-income\n portfolio is diversified and consists primarily of investment-grade\n securities. We use credit default swap contracts, not designated as\n hedging instruments, to manage credit exposures relative to\n broad-based indices and to facilitate portfolio diversification. We\n use credit default swaps as they are a low-cost method of managing\n exposure to individual credit risks or groups of credit risks. As\n of June 30, 2015, the total notional amounts of credit\n contracts purchased and sold were $618 million and $430 million,\n respectively. As of June 30, 2014, the total notional amounts\n of credit contracts purchased and sold were $550 million and $440\n million, respectively.
\n\n
\nCommodity
\n\n We use broad-based\n commodity exposures to enhance portfolio returns and to facilitate\n portfolio diversification. We use swaps, futures, and option\n contracts, not designated as hedging instruments, to generate and\n manage exposures to broad-based commodity indices. We use\n derivatives on commodities as they can be low-cost alternatives to\n the purchase and storage of a variety of commodities, including,\n but not limited to, precious metals, energy, and grain. As of\n June 30, 2015, the total notional amounts of commodity\n contracts purchased and sold were $882 million and $316 million,\n respectively. As of June 30, 2014, the total notional amounts\n of commodity contracts purchased and sold were $1.4 billion and\n $408 million, respectively.
\nCredit-Risk-Related Contingent\n Features
\n\n Certain of our\n counterparty agreements for derivative instruments contain\n provisions that require our issued and outstanding long-term\n unsecured debt to maintain an investment grade credit rating and\n require us to maintain minimum liquidity of $1.0 billion. To the\n extent we fail to meet these requirements, we will be required to\n post collateral, similar to the standard convention related to\n over-the-counter derivatives. As of June 30, 2015, our\n long-term unsecured debt rating was AAA, and cash investments were\n in excess of $1.0 billion. As a result, no collateral was required\n to be posted.
\n\n
\nFair Values of Derivative\n Instruments
\n\n The following table\n presents the fair values of derivative instruments designated as\n hedging instruments (“designated hedge derivatives”)\n and not designated as hedging instruments (“non-designated\n hedge derivatives”). The fair values exclude the impact of\n netting derivative assets and liabilities when a legally\n enforceable master netting agreement exists and fair value\n adjustments related to our own credit risk and counterparty credit\n risk:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | June 30,\n 2015 \n | \n \n | \n | June 30,\n 2014 \n | \n \n | ||||||||||||||||||||||||||
| \n | \n | Assets \n | \n \n | \n | Liabilities \n | \n \n | \n | Assets \n | \n \n | \n | Liabilities \n | \n \n | ||||||||||||||||||||
| (In millions) | \n\n | Short-term \n Investments | \n \n | \n | Other \n Current \n Assets | \n \n | \n | Equity and \n Other \n Investments | \n \n | \n | Other \n Current \n Liabilities | \n \n | \n | Short-term \n Investments | \n \n | \n | Other \n Current \n Assets | \n \n | \n | Equity and \n Other \n Investments | \n \n | \n | Other \n Current \n Liabilities | \n \n | ||||||||
| \n | \n \n | \n |||||||||||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||||
| \n Non-designated Hedge\n Derivatives \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||||
| \n Foreign exchange contracts \n | \n \n | $ | \n17 | \n\n | \n | $ | \n167 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(79 | \n) | \n\n | $ | \n10 | \n\n | \n | $ | \n39 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(97 | \n) | \n
| \n Equity contracts \n | \n \n | \n | 148 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (18 | \n) | \n\n | \n | 177 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (21 | \n) | \n
| \n Interest rate contracts \n | \n \n | \n | 7 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (12 | \n) | \n\n | \n | 17 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (12 | \n) | \n
| \n Credit contracts \n | \n \n | \n | 16 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (9 | \n) | \n\n | \n | 24 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (13 | \n) | \n
| \n Commodity contracts \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 15 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (1 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n188 | \n\n | \n | $ | \n167 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(118 | \n) | \n\n | $ | \n243 | \n\n | \n | $ | \n39 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(144 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||||
| \n Designated Hedge\n Derivatives \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||||||||
| \n Foreign exchange contracts \n | \n \n | $ | \n56 | \n\n | \n | $ | \n552 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(31 | \n) | \n\n | $ | \n1 | \n\n | \n | $ | \n70 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(15 | \n) | \n
| \n Equity contracts \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 25 | \n\n | \n | \n | (69 | \n) | \n\n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 7 | \n\n | \n | \n | (125 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n56 | \n\n | \n | $ | \n552 | \n\n | \n | $ | \n25 | \n\n | \n | $ | \n(100 | \n) | \n\n | $ | \n1 | \n\n | \n | $ | \n70 | \n\n | \n | $ | \n7 | \n\n | \n | $ | \n(140 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total gross amounts of\n derivatives \n | \n \n | $ | \n244 | \n\n | \n | $ | \n719 | \n\n | \n | $ | \n25 | \n\n | \n | $ | \n(218 | \n) | \n\n | $ | \n244 | \n\n | \n | $ | \n109 | \n\n | \n | $ | \n7 | \n\n | \n | $ | \n(284 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n Gross derivatives either offset or\n subject to an enforceable master netting agreement \n | \n \n | $ | \n126 | \n\n | \n | $ | \n719 | \n\n | \n | $ | \n25 | \n\n | \n | $ | \n(218 | \n) | \n\n | $ | \n99 | \n\n | \n | $ | \n109 | \n\n | \n | $ | \n7 | \n\n | \n | $ | \n(284 | \n) | \n
| \n Gross amounts of derivatives offset\n in the balance sheet \n | \n \n | \n | (66 | \n) | \n\n | \n | (71 | \n) | \n\n | \n | (25 | \n) | \n\n | \n | 161 | \n\n | \n | \n | (77 | \n) | \n\n | \n | (71 | \n) | \n\n | \n | (7 | \n) | \n\n | \n | 155 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net amounts presented in the balance\n sheet \n | \n \n | \n | 60 | \n\n | \n | \n | 648 | \n\n | \n | \n | 0 | \n\n | \n | \n | (57 | \n) | \n\n | \n | 22 | \n\n | \n | \n | 38 | \n\n | \n | \n | 0 | \n\n | \n | \n | (129 | \n) | \n
| \n Gross amounts of derivatives not\n offset in the balance sheet \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Cash collateral received \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | (456 | \n) | \n\n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net amount \n | \n \n | $ | \n60 | \n\n | \n | $ | \n648 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(513 | \n) | \n\n | $ | \n22 | \n\n | \n | $ | \n38 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n(129 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n See also Note 4 –\n Investments and Note 6 – Fair Value\n Measurements.
\n\n
\nFair Value Hedge Gains\n (Losses)
\n\n We recognized in other\n income (expense), net the following gains (losses) on contracts\n designated as fair value hedges and their related hedged\n items:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Foreign Exchange\n Contracts \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Derivatives \n | \n \n | $ | \n741 | \n\n | \n | $ | \n(14 | \n) | \n\n | $ | \n70 | \n\n |
| \n Hedged items \n | \n \n | $ | \n(725 | \n) | \n\n | \n | 6 | \n\n | \n | \n | (69 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total amount of\n ineffectiveness \n | \n \n | $ | \n16 | \n\n | \n | $ | \n(8 | \n) | \n\n | $ | \n1 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | |||||||||
| \n Equity Contracts \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Derivatives \n | \n \n | $ | \n(107 | \n) | \n\n | $ | \n(110 | \n) | \n\n | $ | \n0 | \n\n |
| \n Hedged items \n | \n \n | \n | 107 | \n\n | \n | \n | 110 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total amount of\n ineffectiveness \n | \n \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n Amount of equity contracts excluded\n from effectiveness assessment \n | \n \n | $ | \n0 | \n\n | \n | $ | \n(9 | \n) | \n\n | $ | \n0 | \n\n |
| \n | \n \n | \n
Cash Flow Hedge Gains\n (Losses)
\n\n We recognized the\n following gains (losses) on foreign exchange contracts designated\n as cash flow hedges (our only cash flow hedges during the periods\n presented):
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Effective Portion \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Gains recognized in OCI (net of tax\n effects of $35, $2 and $54) \n | \n \n | $ | \n1,152 | \n\n | \n | $ | \n63 | \n\n | \n | $ | \n101 | \n\n |
| \n Gains reclassified from AOCI into\n revenue \n | \n \n | $ | \n608 | \n\n | \n | $ | \n104 | \n\n | \n | $ | \n195 | \n\n |
| \n | \n | \n | \n | |||||||||
| \n Amount Excluded from Effectiveness\n Assessment and Ineffective Portion \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Losses recognized in other income\n (expense), net \n | \n \n | $ | \n(346 | \n) | \n\n | $ | \n(239 | \n) | \n\n | $ | \n(168 | \n) | \n
| \n | \n \n | \n
\n We estimate that $492\n million of net derivative gains included in AOCI at June 30,\n 2015 will be reclassified into earnings within the following 12\n months. No significant amounts of gains (losses) were reclassified\n from AOCI into earnings as a result of forecasted transactions that\n failed to occur during fiscal year 2015.
\nNon-Designated Derivative Gains\n (Losses)
\n\n Gains (losses) from\n changes in fair values of derivatives that are not designated as\n hedges are primarily recognized in other income (expense), net.\n These amounts are shown in the table below, with the exception of\n gains (losses) on derivatives presented in income statement line\n items other than other income (expense), net, which were immaterial\n for the periods presented. Other than those derivatives entered\n into for investment purposes, such as commodity contracts, the\n gains (losses) below are generally economically offset by\n unrealized gains (losses) in the underlying available-for-sale\n securities and gains (losses) from foreign exchange rate changes on\n certain balance sheet amounts.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | |||||||||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Foreign exchange contracts \n | \n \n | $ | \n(483 | \n) | \n\n | $ | \n(78 | \n) | \n\n | $ | \n18 | \n\n |
| \n Equity contracts \n | \n \n | \n | (19 | \n) | \n\n | \n | (64 | \n) | \n\n | \n | 16 | \n\n |
| \n Interest-rate contracts \n | \n \n | \n | 23 | \n\n | \n | \n | 24 | \n\n | \n | \n | (11 | \n) | \n
| \n Credit contracts \n | \n \n | \n | (1 | \n) | \n\n | \n | 13 | \n\n | \n | \n | (3 | \n) | \n
| \n Commodity contracts \n | \n \n | \n | (223 | \n) | \n\n | \n | 71 | \n\n | \n | \n | (42 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n(703 | \n) | \n\n | $ | \n(34 | \n) | \n\n | $ | \n(22 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n The components of\n inventories were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||||||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Raw materials \n | \n \n | $ | \n1,100 | \n\n | \n | $ | \n944 | \n\n |
| \n Work in process \n | \n \n | \n | 202 | \n\n | \n | \n | 266 | \n\n |
| \n Finished goods \n | \n \n | \n | 1,600 | \n\n | \n | \n | 1,450 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n2,902 | \n\n | \n | $ | \n2,660 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Property and\n Equipment
\n\n Property and equipment is\n stated at cost and depreciated using the straight-line method over\n the shorter of the estimated useful life of the asset or the lease\n term. The estimated useful lives of our property and equipment are\n generally as follows: computer software developed or acquired for\n internal use, three to seven years; computer equipment, two to\n three years; buildings and improvements, five to 15 years;\n leasehold improvements, three to 20 years; and furniture and\n equipment, one to 10 years. Land is not depreciated.
\n\n NOTE 3 — OTHER\n INCOME (EXPENSE), NET
\n\n The components of other\n income (expense), net were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Dividends and interest\n income \n | \n \n | $ | \n766 | \n\n | \n | $ | \n883 | \n\n | \n | $ | \n677 | \n\n |
| \n Interest expense \n | \n \n | \n | (781 | \n) | \n\n | \n | (597 | \n) | \n\n | \n | (429 | \n) | \n
| \n Net recognized gains on\n investments \n | \n \n | \n | 716 | \n\n | \n | \n | 437 | \n\n | \n | \n | 116 | \n\n |
| \n Net losses on derivatives \n | \n \n | \n | (423 | \n) | \n\n | \n | (328 | \n) | \n\n | \n | (196 | \n) | \n
| \n Net gains (losses) on foreign\n currency remeasurements \n | \n \n | \n | 335 | \n\n | \n | \n | (165 | \n) | \n\n | \n | (74 | \n) | \n
| \n Other \n | \n \n | \n | (267 | \n) | \n\n | \n | (169 | \n) | \n\n | \n | 194 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n346 | \n\n | \n | $ | \n61 | \n\n | \n | $ | \n288 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n\n Following are details of\n net recognized gains on investments during the periods\n reported:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Other-than-temporary impairments of\n investments \n | \n \n | $ | \n(183 | \n) | \n\n | $ | \n(106 | \n) | \n\n | $ | \n(208 | \n) | \n
| \n Realized gains from sales of\n available-for-sale securities \n | \n \n | \n | 1,176 | \n\n | \n | \n | 776 | \n\n | \n | \n | 489 | \n\n |
| \n Realized losses from sales of\n available-for-sale securities \n | \n \n | \n | (277 | \n) | \n\n | \n | (233 | \n) | \n\n | \n | (165 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n716 | \n\n | \n | $ | \n437 | \n\n | \n | $ | \n116 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Activity in the allowance\n for doubtful accounts was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Balance, beginning of\n period \n | \n \n | $ | \n301 | \n\n | \n | $ | \n336 | \n\n | \n | $ | \n389 | \n\n |
| \n Charged to costs and other \n | \n \n | \n | 77 | \n\n | \n | \n | 16 | \n\n | \n | \n | 4 | \n\n |
| \n Write-offs \n | \n \n | \n | (43 | \n) | \n\n | \n | (51 | \n) | \n\n | \n | (57 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Balance, end of period \n | \n \n | $ | \n335 | \n\n | \n | $ | \n301 | \n\n | \n | $ | \n336 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n The following table\n summarizes the changes in accumulated other comprehensive income by\n component:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | |||||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Derivatives \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Accumulated other comprehensive\n income balance, beginning of period \n | \n \n | $ | \n31 | \n\n | \n | $ | \n66 | \n\n | \n | $ | \n92 | \n\n |
| \n Unrealized gains, net of tax effects\n of $35, $2 and $54 \n | \n \n | \n | 1,152 | \n\n | \n | \n | 63 | \n\n | \n | \n | 101 | \n\n |
| \n Reclassification adjustments for\n gains included in revenue \n | \n \n | \n | (608 | \n) | \n\n | \n | (104 | \n) | \n\n | \n | (195 | \n) | \n
| \n Tax expense included in provision for\n income taxes \n | \n \n | \n | 15 | \n\n | \n | \n | 6 | \n\n | \n | \n | 68 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Amounts reclassified from accumulated\n other comprehensive income \n | \n \n | \n | (593 | \n) | \n\n | \n | (98 | \n) | \n\n | \n | (127 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net current period other\n comprehensive income (loss) \n | \n \n | \n | 559 | \n\n | \n | \n | (35 | \n) | \n\n | \n | (26 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Accumulated other comprehensive\n income balance, end of period \n | \n \n | $ | \n590 | \n\n | \n | $ | \n31 | \n\n | \n | $ | \n66 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n | \n | \n | \n | |||||||||
| \n Investments \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Accumulated other comprehensive\n income balance, beginning of period \n | \n \n | $ | \n3,531 | \n\n | \n | $ | \n1,794 | \n\n | \n | $ | \n1,431 | \n\n |
| \n Unrealized gains, net of tax effects\n of $59, $1,067 and $244 \n | \n \n | \n | 110 | \n\n | \n | \n | 2,053 | \n\n | \n | \n | 453 | \n\n |
| \n Reclassification adjustments for\n gains included in other income (expense), net \n | \n \n | \n | (728 | \n) | \n\n | \n | (447 | \n) | \n\n | \n | (139 | \n) | \n
| \n Tax expense included in provision for\n income taxes \n | \n \n | \n | 256 | \n\n | \n | \n | 131 | \n\n | \n | \n | 49 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Amounts reclassified from accumulated\n other comprehensive income \n | \n \n | \n | (472 | \n) | \n\n | \n | (316 | \n) | \n\n | \n | (90 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Net current period other\n comprehensive income (loss) \n | \n \n | \n | (362 | \n) | \n\n | \n | 1,737 | \n\n | \n | \n | 363 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Accumulated other comprehensive\n income balance, end of period \n | \n \n | $ | \n3,169 | \n\n | \n | $ | \n3,531 | \n\n | \n | $ | \n1,794 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n | \n | \n | \n | |||||||||
| \n Translation Adjustments and\n Other \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Accumulated other comprehensive\n income (loss) balance, beginning of period \n | \n \n | $ | \n146 | \n\n | \n | $ | \n(117 | \n) | \n\n | $ | \n(101 | \n) | \n
| \n Translation adjustments and other,\n net of tax effects of $16, $12 and $(8) \n | \n \n | \n | (1,383 | \n) | \n\n | \n | 263 | \n\n | \n | \n | (16 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Accumulated other comprehensive\n income (loss) balance, end of period \n | \n \n | $ | \n(1,237 | \n) | \n\n | $ | \n146 | \n\n | \n | $ | \n(117 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Accumulated other comprehensive\n income, end of period \n | \n \n | $ | \n2,522 | \n\n | \n | $ | \n3,708 | \n\n | \n | $ | \n1,743 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n During fiscal year 2015,\n the following activity occurred under our stock plans:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Shares | \n\n | \n | \n \n Weighted \n\n Average \n\n Grant-Date \n\n Fair\n Value \n | \n \n | ||||
| \n | \n \n | \n |||||||
| (In millions) | \n\n | \n | \n | \n | ||||
| \n | \n | \n | ||||||
| \n Stock Awards \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Nonvested balance, beginning of\n year \n | \n \n | \n | 259 | \n\n | \n | $ | \n27.88 | \n\n |
| \n Granted \n | \n \n | \n | 75 | \n\n | \n | $ | \n42.36 | \n\n |
| \n Vested \n | \n \n | \n | (94 | \n) | \n\n | $ | \n27.47 | \n\n |
| \n Forfeited \n | \n \n | \n | (24 | \n) | \n\n | $ | \n31.81 | \n\n |
| \n | \n \n | \n \n | \n | \n | \n | |||
| \n Nonvested balance, end of\n year \n | \n \n | \n | 216 | \n\n | \n | $ | \n32.72 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n |
\n During fiscal years 2014\n and 2013, the following activity occurred under our stock\n plans:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions, except fair values) | \n\n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| \n Stock Awards \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | ||||||
| \n Awards\n granted (a) \n | \n \n | \n | 103 | \n\n | \n | \n | 104 | \n\n |
| \n Weighted average grant-date fair\n value \n | \n \n | $ | \n31.50 | \n\n | \n | $ | \n28.37 | \n\n |
| \n | \n \n | \n
\n
\n| (a) | \n\n Awards granted during fiscal year 2014 included four million\n shares in stock replacement awards related to the acquisition of\n NDS. The weighted average grant-date fair value was\n $37.64. \n | \n
Inventories
\n\n Inventories are stated at\n average cost, subject to the lower of cost or market. Cost includes\n materials, labor, and manufacturing overhead related to the\n purchase and production of inventories. We regularly review\n inventory quantities on hand, future purchase commitments with our\n suppliers, and the estimated utility of our inventory. If our\n review indicates a reduction in utility below carrying value, we\n reduce our inventory to a new cost basis through a charge to cost\n of revenue. The determination of market value and the estimated\n volume of demand used in the lower of cost or market analysis\n require significant judgment.
\n\n Revenue, classified by\n the major geographic areas in which our customers are located, was\n as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n United\n States (a) \n | \n \n | $ | \n42,941 | \n\n | \n | $ | \n43,474 | \n\n | \n | $ | \n41,344 | \n\n |
| \n Other countries \n | \n \n | \n | 50,639 | \n\n | \n | \n | 43,359 | \n\n | \n | \n | 36,505 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n93,580 | \n\n | \n | $ | \n86,833 | \n\n | \n | $ | \n77,849 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Includes billings to OEMs and certain multinational\n organizations because of the nature of these businesses and the\n impracticability of determining the geographic source of the\n revenue. \n | \n
Financial\n Instruments
\n\n We consider all highly\n liquid interest-earning investments with a maturity of three months\n or less at the date of purchase to be cash equivalents. The fair\n values of these investments approximate their carrying values. In\n general, investments with original maturities of greater than three\n months and remaining maturities of less than one year are\n classified as short-term investments. Investments with maturities\n beyond one year may be classified as short-term based on their\n highly liquid nature and because such marketable securities\n represent the investment of cash that is available for current\n operations. All cash equivalents and short-term investments are\n classified as available-for-sale and realized gains and losses are\n recorded using the specific identification method. Changes in\n market value, excluding other-than-temporary impairments, are\n reflected in OCI.
\n\n Equity and other\n investments classified as long-term include both debt and equity\n instruments. With the exception of certain corporate notes that are\n classified as held-to-maturity, debt and publicly-traded equity\n securities are classified as available-for-sale and realized gains\n and losses are recorded using the specific identification method.\n Changes in the market value of available-for-sale securities,\n excluding other-than-temporary impairments, are reflected in OCI.\n Held-to-maturity investments are recorded and held at amortized\n cost. Common and preferred stock and other investments that are\n restricted for more than one year or are not publicly traded are\n recorded at cost or using the equity method.
\n\n We lend certain\n fixed-income and equity securities to increase investment returns.\n The loaned securities continue to be carried as investments on our\n balance sheet. Cash and/or security interests are received as\n collateral for the loaned securities with the amount determined\n based upon the underlying security lent and the creditworthiness of\n the borrower. Cash received is recorded as an asset with a\n corresponding liability.
\n\n Investments are\n considered to be impaired when a decline in fair value is judged to\n be other-than-temporary. Fair value is calculated based on publicly\n available market information or other estimates determined by\n management. We employ a systematic methodology on a quarterly basis\n that considers available quantitative and qualitative evidence in\n evaluating potential impairment of our investments. If the cost of\n an investment exceeds its fair value, we evaluate, among other\n factors, general market conditions, credit quality of debt\n instrument issuers, the duration and extent to which the fair value\n is less than cost, and for equity securities, our intent and\n ability to hold, or plans to sell, the investment. For fixed-income\n securities, we also evaluate whether we have plans to sell the\n security or it is more likely than not that we will be required to\n sell the security before recovery. We also consider specific\n adverse conditions related to the financial health of and business\n outlook for the investee, including industry and sector\n performance, changes in technology, and operational and financing\n cash flow factors. Once a decline in fair value is determined to be\n other-than-temporary, an impairment charge is recorded to other\n income (expense), net and a new cost basis in the investment is\n established.
\n\n Derivative instruments\n are recognized as either assets or liabilities and are measured at\n fair value. The accounting for changes in the fair value of a\n derivative depends on the intended use of the derivative and the\n resulting designation.
\n\n For derivative\n instruments designated as fair value hedges, the gains (losses) are\n recognized in earnings in the periods of change together with the\n offsetting losses (gains) on the hedged items attributed to the\n risk being hedged. For options designated as fair value hedges,\n changes in the time value are excluded from the assessment of hedge\n effectiveness and are recognized in earnings.
\n\n For derivative\n instruments designated as cash-flow hedges, the effective portion\n of the gains (losses) on the derivatives is initially reported as a\n component of OCI and is subsequently recognized in earnings when\n the hedged exposure is recognized in earnings. For options\n designated as cash-flow hedges, changes in the time value are\n excluded from the assessment of hedge effectiveness and are\n recognized in earnings. Gains (losses) on derivatives representing\n either hedge components excluded from the assessment of\n effectiveness or hedge ineffectiveness are recognized in\n earnings.
\n\n For derivative\n instruments that are not designated as hedges, gains (losses) from\n changes in fair values are primarily recognized in other income\n (expense), net. Other than those derivatives entered into for\n investment purposes, such as commodity contracts, the gains\n (losses) are generally economically offset by unrealized gains\n (losses) in the underlying available-for-sale securities, which are\n recorded as a component of OCI until the securities are sold or\n other-than-temporarily impaired, at which time the amounts are\n reclassified from accumulated other comprehensive income\n (“AOCI”) into other income (expense), net.
\n\n Below are operating\n expenses by segment group. As discussed above, we do not allocate\n operating expenses to our segments.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Devices and Consumer \n | \n \n | $ | \n11,505 | \n\n | \n | $ | \n11,219 | \n\n | \n | $ | \n10,625 | \n\n |
| \n Commercial \n | \n \n | \n | 17,177 | \n\n | \n | \n | 16,993 | \n\n | \n | \n | 16,050 | \n\n |
| \n Corporate and Other \n | \n \n | \n | 3,688 | \n\n | \n | \n | 3,657 | \n\n | \n | \n | 4,025 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total segment operating\n expenses \n | \n \n | \n | 32,370 | \n\n | \n | \n | 31,869 | \n\n | \n | \n | 30,700 | \n\n |
| \n Impairment, integration, and\n restructuring \n | \n \n | \n | 10,011 | \n\n | \n | \n | 127 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total operating expenses \n | \n \n | $ | \n42,381 | \n\n | \n | $ | \n31,996 | \n\n | \n | $ | \n30,700 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n NOTE 17 —\n COMMITMENTS AND GUARANTEES
\nConstruction and Operating\n Leases
\n\n We have committed $681\n million for constructing new buildings, building improvements, and\n leasehold improvements as of June 30, 2015.
\n\n We have operating leases\n for most U.S. and international sales and support offices, research\n and development facilities, manufacturing facilities, retail\n stores, and certain equipment. Rental expense for facilities\n operating leases was $989 million, $874 million, and $711 million,\n in fiscal years 2015, 2014, and 2013, respectively. Future minimum\n rental commitments under non-cancellable facilities operating\n leases in place as of June 30, 2015 are as follows:
\n\n
\n| \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | |
| \n | \n \n | \n |||
| \n | \n | |||
| \n Year Ending\n June 30, \n | \n \n | \n | \n | \n |
| \n | \n | |||
| \n 2016 \n | \n \n | $ | \n863 | \n\n |
| \n 2017 \n | \n \n | \n | 803 | \n\n |
| \n 2018 \n | \n \n | \n | 735 | \n\n |
| \n 2019 \n | \n \n | \n | 611 | \n\n |
| \n 2020 \n | \n \n | \n | 524 | \n\n |
| \n Thereafter \n | \n \n | \n | 1,617 | \n\n |
| \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n5,153 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n
Indemnifications
\n\n We provide\n indemnifications of varying scope and size to certain customers\n against claims of intellectual property infringement made by third\n parties arising from the use of our products and certain other\n matters. We evaluate estimated losses for these indemnifications,\n and we consider such factors as the degree of probability of an\n unfavorable outcome and the ability to make a reasonable estimate\n of the amount of loss. To date, we have not encountered significant\n costs as a result of these obligations and have not accrued any\n liabilities related to these indemnifications in our consolidated\n financial statements.
\n\n We repurchased the\n following shares of common stock under the above-described\n repurchase plans:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Shares | \n\n | \n | Amount | \n\n | \n | Shares | \n\n | \n | Amount | \n\n | \n | Shares | \n\n | \n | Amount | \n\n | ||||||
| \n | \n \n | \n |||||||||||||||||||||||
| \n | \n | \n | \n | |||||||||||||||||||||
| Year Ended June 30, | \n\n | \n | 2015 | \n\n | \n | \n | 2014 (a) | \n\n | \n | \n | 2013 | \n\n | ||||||||||||
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n First quarter \n | \n \n | \n | 43 | \n\n | \n | $ | \n2,000 | \n\n | \n | \n | 47 | \n\n | \n | $ | \n1,500 | \n\n | \n | \n | 33 | \n\n | \n | $ | \n1,000 | \n\n |
| \n Second quarter \n | \n \n | \n | 43 | \n\n | \n | \n | 2,000 | \n\n | \n | \n | 53 | \n\n | \n | \n | 2,000 | \n\n | \n | \n | 58 | \n\n | \n | \n | 1,607 | \n\n |
| \n Third quarter \n | \n \n | \n | 116 | \n\n | \n | \n | 5,000 | \n\n | \n | \n | 47 | \n\n | \n | \n | 1,791 | \n\n | \n | \n | 36 | \n\n | \n | \n | 1,000 | \n\n |
| \n Fourth quarter \n | \n \n | \n | 93 | \n\n | \n | \n | 4,209 | \n\n | \n | \n | 28 | \n\n | \n | \n | 1,118 | \n\n | \n | \n | 31 | \n\n | \n | \n | 1,000 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | \n | 295 | \n\n | \n | $ | \n13,209 | \n\n | \n | \n | 175 | \n\n | \n | $ | \n6,409 | \n\n | \n | \n | 158 | \n\n | \n | $ | \n4,607 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Of\n the 175 million shares repurchased in fiscal year 2014,\n 128 million shares were repurchased for $4.9 billion under the\n share repurchase program approved by our Board of Directors on\n September 16, 2013 and 47 million shares were repurchased\n for $1.5 billion under the share repurchase program that was\n announced on September 22, 2008 and expired on\n September 30, 2013. \n | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||||
| \n | \n | \n | \n | \n | ||||||||||
| Year Ended June 30, | \n\n | \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | \n | ||||||||||
| \n Gross margin \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||
| \n Devices and Consumer \n | \n \n | \n Licensing \n | \n \n | $ | \n13,870 | \n\n | \n | $ | \n17,439 | \n\n | \n | $ | \n16,985 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n Hardware: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Computing and Gaming\n Hardware \n | \n \n | \n | 1,788 | \n\n | \n | \n | 892 | \n\n | \n | \n | 956 | \n\n |
| \n | \n | \n Phone Hardware \n | \n \n | \n | 701 | \n\n | \n | \n | 54 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer\n Hardware \n | \n \n | \n | 2,489 | \n\n | \n | \n | 946 | \n\n | \n | \n | 956 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 2,022 | \n\n | \n | \n | 1,393 | \n\n | \n | \n | 1,951 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Devices and Consumer \n | \n \n | \n | 18,381 | \n\n | \n | \n | 19,778 | \n\n | \n | \n | 19,892 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n | \n | \n | ||||||||||
| \n Commercial \n | \n \n | \n Licensing \n | \n \n | \n | 37,830 | \n\n | \n | \n | 38,615 | \n\n | \n | \n | 36,280 | \n\n |
| \n | \n | \n Other \n | \n \n | \n | 4,199 | \n\n | \n | \n | 1,855 | \n\n | \n | \n | 922 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n | \n | \n Total Commercial \n | \n \n | \n | 42,029 | \n\n | \n | \n | 40,470 | \n\n | \n | \n | 37,202 | \n\n |
| \n Corporate and Other \n | \n \n | \n | \n | \n | 132 | \n\n | \n | \n | (493 | \n) | \n\n | \n | 370 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||||
| \n Total gross margin \n | \n \n | \n | \n | $ | \n60,542 | \n\n | \n | $ | \n59,755 | \n\n | \n | $ | \n57,464 | \n\n |
| \n | \n | \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n The components of\n investments, including associated derivatives, but excluding\n held-to-maturity investments, were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Cost Basis | \n\n | \n | \n \n Unrealized \n\n Gains \n | \n \n | \n | \n \n Unrealized \n\n Losses \n | \n \n | \n | \n \n Recorded \n\n Basis \n | \n \n | \n | \n \n Cash \n\n and\n Cash \n\n Equivalents \n | \n \n | \n | \n \n Short-term \n\n Investments \n | \n \n | \n | \n \n Equity \n\n and\n Other \n\n Investments \n | \n \n | |||||||
| \n | \n \n | \n |||||||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | |||||||||||||||||||||
| \n June 30, 2015 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | |||||||||||||||||||||
| \n Cash \n | \n \n | $ | \n3,679 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n3,679 | \n\n | \n | $ | \n3,679 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n |
| \n Mutual funds \n | \n \n | \n | 1,100 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,100 | \n\n | \n | \n | 1,100 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Commercial paper \n | \n \n | \n | 1 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1 | \n\n | \n | \n | 1 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Certificates of deposit \n | \n \n | \n | 906 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 906 | \n\n | \n | \n | 776 | \n\n | \n | \n | 130 | \n\n | \n | \n | 0 | \n\n |
| \n U.S. government and\n agency securities \n | \n \n | \n | 72,843 | \n\n | \n | \n | 76 | \n\n | \n | \n | (30 | \n) | \n\n | \n | 72,889 | \n\n | \n | \n | 39 | \n\n | \n | \n | 72,850 | \n\n | \n | \n | 0 | \n\n |
| \n Foreign government bonds \n | \n \n | \n | 5,477 | \n\n | \n | \n | 3 | \n\n | \n | \n | (24 | \n) | \n\n | \n | 5,456 | \n\n | \n | \n | 0 | \n\n | \n | \n | 5,456 | \n\n | \n | \n | 0 | \n\n |
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 4,899 | \n\n | \n | \n | 23 | \n\n | \n | \n | (6 | \n) | \n\n | \n | 4,916 | \n\n | \n | \n | 0 | \n\n | \n | \n | 4,916 | \n\n | \n | \n | 0 | \n\n |
| \n Corporate notes and bonds \n | \n \n | \n | 7,192 | \n\n | \n | \n | 97 | \n\n | \n | \n | (37 | \n) | \n\n | \n | 7,252 | \n\n | \n | \n | 0 | \n\n | \n | \n | 7,252 | \n\n | \n | \n | 0 | \n\n |
| \n Municipal securities \n | \n \n | \n | 285 | \n\n | \n | \n | 35 | \n\n | \n | \n | (1 | \n) | \n\n | \n | 319 | \n\n | \n | \n | 0 | \n\n | \n | \n | 319 | \n\n | \n | \n | 0 | \n\n |
| \n Common and preferred stock \n | \n \n | \n | 6,668 | \n\n | \n | \n | 4,986 | \n\n | \n | \n | (215 | \n) | \n\n | \n | 11,439 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,439 | \n\n |
| \n Other investments \n | \n \n | \n | 597 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 597 | \n\n | \n | \n | 0 | \n\n | \n | \n | 8 | \n\n | \n | \n | 589 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n103,647 | \n\n | \n | $ | \n5,220 | \n\n | \n | $ | \n(313 | \n) | \n\n | $ | \n108,554 | \n\n | \n | $ | \n5,595 | \n\n | \n | $ | \n90,931 | \n\n | \n | $ | \n12,028 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Cost Basis | \n\n | \n | \n \n Unrealized \n\n Gains \n | \n \n | \n | \n \n Unrealized \n\n Losses \n | \n \n | \n | \n \n Recorded \n\n Basis \n | \n \n | \n | \n \n Cash \n\n and\n Cash \n\n Equivalents \n | \n \n | \n | \n \n Short-term \n\n Investments \n | \n \n | \n | \n \n Equity \n\n and\n Other \n\n Investments \n | \n \n | |||||||
| \n | \n \n | \n |||||||||||||||||||||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | |||||||||||||||||||||
| \n June 30, 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | |||||||||||||||||||||
| \n Cash \n | \n \n | $ | \n4,980 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n4,980 | \n\n | \n | $ | \n4,980 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n |
| \n Mutual funds \n | \n \n | \n | 590 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 590 | \n\n | \n | \n | 590 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Commercial paper \n | \n \n | \n | 189 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 189 | \n\n | \n | \n | 89 | \n\n | \n | \n | 100 | \n\n | \n | \n | 0 | \n\n |
| \n Certificates of deposit \n | \n \n | \n | 1,197 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,197 | \n\n | \n | \n | 865 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n |
| \n U.S. government and\n agency securities \n | \n \n | \n | 66,952 | \n\n | \n | \n | 103 | \n\n | \n | \n | (29 | \n) | \n\n | \n | 67,026 | \n\n | \n | \n | 109 | \n\n | \n | \n | 66,917 | \n\n | \n | \n | 0 | \n\n |
| \n Foreign government bonds \n | \n \n | \n | 3,328 | \n\n | \n | \n | 17 | \n\n | \n | \n | (10 | \n) | \n\n | \n | 3,335 | \n\n | \n | \n | 2,027 | \n\n | \n | \n | 1,308 | \n\n | \n | \n | 0 | \n\n |
| \n Mortgage- and asset-backed\n securities \n | \n \n | \n | 991 | \n\n | \n | \n | 30 | \n\n | \n | \n | (2 | \n) | \n\n | \n | 1,019 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,019 | \n\n | \n | \n | 0 | \n\n |
| \n Corporate notes and bonds \n | \n \n | \n | 6,845 | \n\n | \n | \n | 191 | \n\n | \n | \n | (9 | \n) | \n\n | \n | 7,027 | \n\n | \n | \n | 9 | \n\n | \n | \n | 7,018 | \n\n | \n | \n | 0 | \n\n |
| \n Municipal securities \n | \n \n | \n | 287 | \n\n | \n | \n | 45 | \n\n | \n | \n | 0 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n | \n | \n | 332 | \n\n | \n | \n | 0 | \n\n |
| \n Common and preferred stock \n | \n \n | \n | 6,785 | \n\n | \n | \n | 5,207 | \n\n | \n | \n | (81 | \n) | \n\n | \n | 11,911 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,911 | \n\n |
| \n Other investments \n | \n \n | \n | 1,164 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 1,164 | \n\n | \n | \n | 0 | \n\n | \n | \n | 14 | \n\n | \n | \n | 1,150 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n93,308 | \n\n | \n | $ | \n5,593 | \n\n | \n | $ | \n(131 | \n) | \n\n | $ | \n98,770 | \n\n | \n | $ | \n8,669 | \n\n | \n | $ | \n77,040 | \n\n | \n | $ | \n13,061 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n The fair value of each\n award was estimated on the date of grant using the following\n assumptions:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n\n | \n\n | \n|||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Dividends per share (quarterly\n amounts) \n | \n \n | $ | \n0.28 - $ 0.31 | \n\n | \n | $ | \n0.23 - $ 0.28 | \n\n | \n | $ | \n0.20 - $ 0.23 | \n\n |
| \n Interest rates range \n | \n \n | \n | 1.2% - 1.9% | \n\n | \n | \n | 1.3% - 1.8% | \n\n | \n | \n | 0.6% - 1.1% | \n\n |
| \n | \n \n | \n
\n The following table\n reconciles the total “Net Fair Value” of assets above\n to the balance sheet presentation of these same assets in Note 4\n – Investments.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||||||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Net fair value of assets measured at\n fair value on a recurring basis \n | \n \n | $ | \n104,369 | \n\n | \n | $ | \n92,164 | \n\n |
| \n Cash \n | \n \n | \n | 3,679 | \n\n | \n | \n | 4,980 | \n\n |
| \n Common and preferred stock measured\n at fair value on a nonrecurring basis \n | \n \n | \n | 561 | \n\n | \n | \n | 520 | \n\n |
| \n Other investments measured at fair\n value on a nonrecurring basis \n | \n \n | \n | 589 | \n\n | \n | \n | 1,150 | \n\n |
| \n Less derivative net assets classified\n as other current assets \n | \n \n | \n | (648 | \n) | \n\n | \n | (38 | \n) | \n
| \n Other \n | \n \n | \n | 4 | \n\n | \n | \n | (6 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Recorded basis of investment\n components \n | \n \n | $ | \n108,554 | \n\n | \n | $ | \n98,770 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Below is operating income\n (loss) by segment group.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Devices and Consumer \n | \n \n | $ | \n6,876 | \n\n | \n | $ | \n8,559 | \n\n | \n | $ | \n9,267 | \n\n |
| \n Commercial \n | \n \n | \n | 24,852 | \n\n | \n | \n | 23,477 | \n\n | \n | \n | 21,152 | \n\n |
| \n Corporate and Other \n | \n \n | \n | (13,567 | \n) | \n\n | \n | (4,277 | \n) | \n\n | \n | (3,655 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total operating income \n | \n \n | $ | \n18,161 | \n\n | \n | $ | \n27,759 | \n\n | \n | $ | \n26,764 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n Corporate and Other\n activity was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Corporate (a)\n (b) \n | \n \n | $ | \n(13,575 | \n) | \n\n | $ | \n(3,744 | \n) | \n\n | $ | \n(4,102 | \n) | \n
| \n Other (adjustments to U.S.\n GAAP): \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Revenue reconciling\n amounts (c) \n | \n \n | \n | 204 | \n\n | \n | \n | (415 | \n) | \n\n | \n | 403 | \n\n |
| \n Cost of revenue reconciling\n amounts \n | \n \n | \n | (72 | \n) | \n\n | \n | (78 | \n) | \n\n | \n | (31 | \n) | \n
| \n Operating expenses reconciling\n amounts \n | \n \n | \n | (124 | \n) | \n\n | \n | (40 | \n) | \n\n | \n | 75 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total Corporate and Other \n | \n \n | $ | \n(13,567 | \n) | \n\n | $ | \n(4,277 | \n) | \n\n | $ | \n(3,655 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Corporate is presented on the basis of our internal\n accounting policies and excludes the adjustments to U.S. GAAP that\n are presented separately in those line items. \n | \n
| (b) | \n\n Corporate for fiscal year 2015 included impairment,\n integration, and restructuring expenses of $10.0\n billion. \n | \n
| (c) | \n\n Revenue reconciling amounts for fiscal year 2015 included a\n net $303 million of previously deferred net revenue related to\n sales of bundled products and services (“Bundled\n Offerings”). Revenue reconciling amounts for fiscal year 2014\n included a net $349 million of revenue deferrals related to Bundled\n Offerings. Revenue reconciling amounts for fiscal year 2013\n included the recognition of $540 million of revenue previously\n deferred on sales of Windows 7 with an option to upgrade to Windows\n 8 Pro at a discounted price. \n | \n
\n Unearned revenue by\n segment was as follows, with segments with significant balances\n shown separately:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | \n | ||||||
| \n Commercial Licensing \n | \n \n | $ | \n17,672 | \n\n | \n | $ | \n19,099 | \n\n |
| \n Commercial Other \n | \n \n | \n | 5,641 | \n\n | \n | \n | 3,934 | \n\n |
| \n Rest of the segments \n | \n \n | \n | 2,005 | \n\n | \n | \n | 2,125 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n25,318 | \n\n | \n | $ | \n25,158 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
Sales and\n Marketing
\n\n Sales and marketing expenses include payroll, employee\n benefits, stock-based compensation expense, and other\n headcount-related expenses associated with sales and marketing\n personnel, and the costs of advertising, promotions, trade shows,\n seminars, and other programs. Advertising costs are expensed as\n incurred. Advertising expense was $1.9 billion, $2.3 billion, and\n $2.6 billion in fiscal years 2015, 2014, and 2013,\n respectively.
\nEmployee Stock Purchase\n Plan
\n\n Shares of our common\n stock may be purchased by employees at three-month intervals at 90%\n of the fair market value of the stock on the last day of each\n three-month period. Compensation expense for the employee stock\n purchase plan is measured as the discount the employee is entitled\n to upon purchase and is recognized in the period of\n purchase.
\n\n Future minimum rental\n commitments under non-cancellable facilities operating leases in\n place as of June 30, 2015 are as follows:
\n\n
\n| \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | |
| \n | \n \n | \n |||
| \n | \n | |||
| \n Year Ending\n June 30, \n | \n \n | \n | \n | \n |
| \n | \n | |||
| \n 2016 \n | \n \n | $ | \n863 | \n\n |
| \n 2017 \n | \n \n | \n | 803 | \n\n |
| \n 2018 \n | \n \n | \n | 735 | \n\n |
| \n 2019 \n | \n \n | \n | 611 | \n\n |
| \n 2020 \n | \n \n | \n | 524 | \n\n |
| \n Thereafter \n | \n \n | \n | 1,617 | \n\n |
| \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n5,153 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n
\n Gains (losses) from\n changes in fair values of derivatives that are not designated as\n hedges are primarily recognized in other income (expense), net.\n These amounts are shown in the table below, with the exception of\n gains (losses) on derivatives presented in income statement line\n items other than other income (expense), net, which were immaterial\n for the periods presented. Other than those derivatives entered\n into for investment purposes, such as commodity contracts, the\n gains (losses) below are generally economically offset by\n unrealized gains (losses) in the underlying available-for-sale\n securities and gains (losses) from foreign exchange rate changes on\n certain balance sheet amounts.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | |||||||||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Foreign exchange contracts \n | \n \n | $ | \n(483 | \n) | \n\n | $ | \n(78 | \n) | \n\n | $ | \n18 | \n\n |
| \n Equity contracts \n | \n \n | \n | (19 | \n) | \n\n | \n | (64 | \n) | \n\n | \n | 16 | \n\n |
| \n Interest-rate contracts \n | \n \n | \n | 23 | \n\n | \n | \n | 24 | \n\n | \n | \n | (11 | \n) | \n
| \n Credit contracts \n | \n \n | \n | (1 | \n) | \n\n | \n | 13 | \n\n | \n | \n | (3 | \n) | \n
| \n Commodity contracts \n | \n \n | \n | (223 | \n) | \n\n | \n | 71 | \n\n | \n | \n | (42 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total \n | \n \n | $ | \n(703 | \n) | \n\n | $ | \n(34 | \n) | \n\n | $ | \n(22 | \n) | \n
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
\n We recognized the\n following gains (losses) on foreign exchange contracts designated\n as cash flow hedges (our only cash flow hedges during the periods\n presented):
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Effective Portion \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Gains recognized in OCI (net of tax\n effects of $35, $2 and $54) \n | \n \n | $ | \n1,152 | \n\n | \n | $ | \n63 | \n\n | \n | $ | \n101 | \n\n |
| \n Gains reclassified from AOCI into\n revenue \n | \n \n | $ | \n608 | \n\n | \n | $ | \n104 | \n\n | \n | $ | \n195 | \n\n |
| \n | \n | \n | \n | |||||||||
| \n Amount Excluded from Effectiveness\n Assessment and Ineffective Portion \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Losses recognized in other income\n (expense), net \n | \n \n | $ | \n(346 | \n) | \n\n | $ | \n(239 | \n) | \n\n | $ | \n(168 | \n) | \n
| \n | \n \n | \n
\n We recognized in other\n income (expense), net the following gains (losses) on contracts\n designated as fair value hedges and their related hedged\n items:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |||
| \n | \n \n | \n |||||||||||
| \n | \n | \n | \n | |||||||||
| Year Ended June 30, | \n\n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | \n | \n | |||||||||
| \n Foreign Exchange\n Contracts \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Derivatives \n | \n \n | $ | \n741 | \n\n | \n | $ | \n(14 | \n) | \n\n | $ | \n70 | \n\n |
| \n Hedged items \n | \n \n | $ | \n(725 | \n) | \n\n | \n | 6 | \n\n | \n | \n | (69 | \n) | \n
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total amount of\n ineffectiveness \n | \n \n | $ | \n16 | \n\n | \n | $ | \n(8 | \n) | \n\n | $ | \n1 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n | \n | \n | \n | |||||||||
| \n Equity Contracts \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | |||||||||
| \n Derivatives \n | \n \n | $ | \n(107 | \n) | \n\n | $ | \n(110 | \n) | \n\n | $ | \n0 | \n\n |
| \n Hedged items \n | \n \n | \n | 107 | \n\n | \n | \n | 110 | \n\n | \n | \n | 0 | \n\n |
| \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n |||
| \n Total amount of\n ineffectiveness \n | \n \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n0 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n \n | \n | \n \n | \n \n | \n
| \n Amount of equity contracts excluded\n from effectiveness assessment \n | \n \n | $ | \n0 | \n\n | \n | $ | \n(9 | \n) | \n\n | $ | \n0 | \n\n |
| \n | \n \n | \n
\n Following are the\n supplemental consolidated results of Microsoft Corporation on an\n unaudited pro forma basis, as if the Acquisition had been\n consummated on July 1, 2012:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions, except per share amounts) | \n\n | \n | \n | \n | \n | \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| Year Ended June 30, | \n\n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | \n | ||||||
| \n Revenue \n | \n \n | $ | \n96,248 | \n\n | \n | $ | \n93,243 | \n\n |
| \n Net income \n | \n \n | $ | \n20,234 | \n\n | \n | $ | \n20,153 | \n\n |
| \n Diluted earnings per share \n | \n \n | $ | \n2.41 | \n\n | \n | $ | \n2.38 | \n\n |
| \n | \n \n | \n
\n Following are the details\n of the purchase price allocated to the intangible assets\n acquired:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| (In millions) | \n\n | Amount | \n\n | \n | \n \n Weighted \n\n Average Life \n | \n \n | ||
| \n | \n \n | \n |||||||
| \n | \n | \n | ||||||
| \n Technology-based \n | \n \n | $ | \n2,493 | \n\n | \n | \n | 9 years | \n\n |
| \n Contract-based \n | \n \n | \n | 1,500 | \n\n | \n | \n | 9 years | \n\n |
| \n Customer-related \n | \n \n | \n | 359 | \n\n | \n | \n | 3 years | \n\n |
| \n Marketing-related (trade\n names) \n | \n \n | \n | 157 | \n\n | \n | \n | 2 years | \n\n |
| \n | \n \n | \n \n | \n | \n | \n | |||
| \n Fair value of intangible assets\n acquired \n | \n \n | $ | \n4,509 | \n\n | \n | \n | 8 years | \n\n |
| \n | \n | \n | \n \n | \n \n | \n \n | \n | \n | \n |
\n The major classes of\n assets and liabilities to which we have allocated the purchase\n price were as follows:
\n\n
\n| \n | \n | \n | \n | \n |
| (In millions) | \n\n | |||
| \n | \n \n | \n |||
| \n | \n | |||
| \n Cash \n | \n \n | $ | \n1,506 | \n\n |
| \n Accounts\n receivable (a) \n | \n \n | \n | 754 | \n\n |
| \n Inventories \n | \n \n | \n | 544 | \n\n |
| \n Other current assets \n | \n \n | \n | 936 | \n\n |
| \n Property and equipment \n | \n \n | \n | 981 | \n\n |
| \n Intangible assets \n | \n \n | \n | 4,509 | \n\n |
| \n Goodwill (b) \n | \n \n | \n | 5,456 | \n\n |
| \n Other \n | \n \n | \n | 221 | \n\n |
| \n Current liabilities \n | \n \n | \n | (4,575 | \n) | \n
| \n Long-term liabilities \n | \n \n | \n | (890 | \n) | \n
| \n | \n \n | \n |||
| \n Total purchase price \n | \n \n | $ | \n9,442 | \n\n |
| \n | \n | \n | \n \n | \n \n | \n
\n
\n| (a) | \n\n Gross accounts receivable was $901 million, of which $147\n million was expected to be uncollectible. \n | \n
| (b) | \n\n Goodwill was assigned to our Phone Hardware segment. The\n goodwill was primarily attributed to increased synergies that were\n expected to be achieved from the integration of NDS. \n | \n